US: Disinflation persisted in December – UOB
17.01.2023, 14:48

US: Disinflation persisted in December – UOB

Senior Economist at UOB Group Alvin Liew reviews the latest US inflation figures.

Key Takeaways

“US headline consumer price inflation (CPI) declined by -0.1% m/m in Dec, from 0.1% in Nov, exactly in line with Bloomberg’s survey and more importantly, was the first sequential contraction recorded since May 2020. As a result, headline inflation eased off further from the Jun 2022 peak of 9.1% y/y to 6.5% y/y in Dec, against 7.1% in Nov. In comparison, core CPI rose by a faster 0.3% m/m pace (from 0.2% m/m in Nov) which was also the consensus expectation. Despite the m/m increase, core CPI decelerated on a y/y basis to 5.7% against 6.0% in Nov, and exactly in line with Bloomberg’s median estimate and also the smallest y/y rise since Dec 2021.”

“Within the overall CPI, it was the decline in gasoline prices that contributed the most to the overall -0.1% m/m decrease, more than offsetting increases in the shelter cost index. In y/y terms, housing, food and services inflation continued to contribute strongly to overall inflation, while the improvement in the y/y overall CPI inflation was largely driven by declines in gasoline prices and used cars and truck prices.”

US Inflation Outlook – If the CPI momentum is able to hold at around 0.1%-0.3% m/m in 2023 (vs. average of 0.5% m/m in 2022, 0.6% m/m in 2021), then there is a good chance for the inflation to move towards the US Fed’s target of 2% by the end of 2023. For the full year, we still expect both headline and core inflation to average 3.0% in 2023, above the Fed’s 2% objective. The balance of risk on inflation remains on the upside.”

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