“Biden Inflation Up!” – Stocks Slump With Rate-Cut Hopes As CPI Soars In January

Tl;dr: Headline CPI accelerated for the 7th straight month as the Biden admin BLS is gone but the surge in money-supply they left behind is still in play:

CPI Highlights:

• The index for shelter rose 0.4 percent in January, accounting for nearly 30 percent of the monthly all items increase. 

• The energy index rose 1.1 percent over the month, as the gasoline index increased 1.8 percent.

• The index for food also increased in January, rising 0.4 percent as the index for food at home rose 0.5 percent and the index for food away from home increased 0.2 percent.

• The food at home index rose 0.5 percent over the month. The index for meats, poultry, fish, and eggs rose 1.9 percent over the month, as the index for eggs increased 15.2 percent. This was the largest increase in the eggs index since June 2015 and it accounted for about two thirds of the total monthly food at home increase

• The food away from home index rose 0.2 percent in January. The index for limited service meals rose 0.3 percent over the month and the index for full service meals rose 0.1 percent

• The index for nonalcoholic beverages increased 2.2 percent over the same period, while the index for other food at home rose 0.8 percent and the index for dairy and related products increased 1.2 percent

• The energy index increased 1.1 percent in January. The gasoline index increased 1.8 percent over the month.

• The index for natural gas rose 1.8 percent over the month while the index for electricity was unchanged in January

Core CPI Details:

• Indexes that increased over the month include motor vehicle insurance, recreation, used cars and trucks, medical care, communication, and airline fares. The indexes for apparel, personal care, and household furnishings and operations were among the few major indexes that decreased in January.

• The shelter index increased 0.4 percent over the month.

  • The index for owners’ equivalent rent rose 0.3 percent in January, as did the index for rent.

  • The lodging away from home index increased 1.4 percent in January.

• The medical care index increased 0.2 percent over the month. The index for prescription drugs increased 2.5 percent in January and the index for hospital services rose 0.9 percent over the month.

  • The physicians’ services index increased 0.1 percent in January.

• The motor vehicle insurance index rose 2.0 percent in January.

• The index for recreation rose 1.0 percent over the month and the index for used cars and trucks increased 2.2 percent.

• Other indexes that increased in January include communication, airline fares, and education.

• In contrast, the index for apparel fell 1.4 percent in January.

• The indexes for personal care and household furnishings and operations also declined over the month. The new vehicles index was unchanged in January.

President Trump clarifies who is to blame for this…

The other partner in crime is also obvious… Fed Chair Powell and his pals pumping markets in desperation into the election…

Repeating the mistakes of the past…

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As we highlighted in our preview, the CPI matters a lot, again!

After last month’s CPI report came in cooler than expected, with Core CPI missing expectations both sequentially and YoY, analysts expect core to accelerate sequentially, but bear in mind we have the annual revisions malarkey to wade through first, so who knows what the ‘expectation’ will be comparable to.

Seasonality screams big beat today, as Deutsche Bank’s Jim Reid points out, surprises to CPI over the last 25-plus years have been more likely to be biased to the upside in H1 than in H2. January’s release (which we will see today) has seen the largest number of beats (50%) and the lowest number of downside misses (15%).

And sure enough, both headline and core CPI rose more than expected in January. Headline CPI jumped 0.5% MoM (+0.3% exp) dragging the price series up 3.0% YoY (+2.9% exp). That is the seventh straight month of accelerating MoM CPI prints…

Source: Bloomberg

Core Services costs are accelerating rapidly…

Source: Bloomberg

Core CPI – more watched – jumped 0.4% MoM (more than the 0.3% rise expected) and that dragged core consumer prices up 3.3% YoY (3.2% exp)…

Source: Bloomberg

Core Goods prices have shifted away from YoY deflation…

Source: Bloomberg

The so-called ‘SuperCore CPI’ exploded 0.7% MoM higher in January, leaving the YoY rise in prices ‘sticky’ above 4%…

Source: Bloomberg

Transportation Services costs soared…

Source: Bloomberg

Shelter inflation has flatlined, rising in Jan to 5.06% YoY from 4.99% in Dec, while rent inflation continues to drop, now at 4.60% from 4.72% in Dec, and the lowest since March 2022

Breakfast just got a lot more expensive…

Wow! My Bacon, Egg & Cheese (With a Cup of Coffee) Price Index just saw its largest-ever monthly price jump in January, surging 6.1% (+18 cents)! Here are the details:

(Chart from WSL POLITICS) pic.twitter.com/iVdg4yMXek

— Michael McDonough (@M_McDonough) February 12, 2025

And before everyone blames Trump, this was baked in the cake from the last year of money supply pumping by Bidenomics…

Source: Bloomberg

Finally, what will stocks do with this new information?

It’s certainly been a wild ride on Payrolls and CPI days, but as Goldman’s Lee Coppersmith notes, a hit CPI liked this suggests considerable downside for the S&P today…

And in the pre-market, futures are heading that way…

Perhaps more notably, the market is now pricing in just one rate cut this year (pushing expectations from Sept to Dec)…

…but is it different this time under Trump?

Do you see what happens Larry, when Biden’s BLS is no longer around to pretend “inflation is contained” pic.twitter.com/bZ2Dcbdmja

— zerohedge (@zerohedge) February 12, 2025