Inflation Trends and the RCF Inflation Scorecard – January 2024

Disappointing Start to 2024

Peter Bernstein, Chief Economist,, 312-431-1540 x1515

The Current Situation

Inflation came in hotter than expected in January, with the CPI increasing 0.3% and core CPI rising 0.4%. Although the headline CPI inflation rate declined to 3.1% from December’s 3.4% rate, the monthly price rise in January suggests that inflation is not clearly on its way down and remains above the Fed’s 2% target.  Shelter inflation (rent and owner’s equivalent rent) continues to be a problem.  While it has been declining, it is still running at a 6% annual rate. Add in the fact that recent CPI revisions have increased the weight of shelter to 36.2% of the CPI (up from 34.4% previously) and the problem is clear.  If over one-third of the CPI is rising 6% per year, the other two-thirds would have to show no inflation at all to result in a 2% overall inflation rate. As it is now, non-shelter inflation is running at 1.5%; a good number on its own but not low enough to offset the rise in shelter prices.

Figure showing year-on-year CPI, Core CPI and CPI All Items Less Shelter.

Core prices in January were up 3.9% vs. a year ago, the same core inflation rate we saw in December. The shelter price issue is even more significant here because they represent over 40% of the core CPI.
While the year-over-year inflation rate is strongly impacted by shelter inflation, the month-to-month increase in prices in January was far more widespread. That is a bigger concern going forward because while shelter price inflation has consistently been declining, the trend in the rest of the CPI index is much more mixed.

RCF’s Inflation Scorecard

RCF’s Inflation Scorecard is based on analysis of 20 different price series comprising 98% of the total consumer price index. Each of these price series represents a portion of the CPI based on household spending patterns. For example, food purchased for at-home consumption is about 8.2% of the typical consumer’s budget; it has a weight of 8.17 out of a total index of 100. The weights presented in our scorecard reflect BLS updates released in early January.
Our scorecard presents two metrics to track month-to-month price increases. The first metric is the share of the index for which inflation in the most recent month is rising (greater than the prior month’s inflation) vs. the share of the index for which inflation is falling (lower than the prior month) or prices fell (deflation). Because deflation is showing up across more categories, we’ve added a separate measure of the total weight of deflation within the CPI index.
Our second metric is the share of the index for which the most recent month’s inflation exceeded 0.2%, a monthly rate that corresponds to the Federal Reserve’s target inflation rate of 2% per year.

Bar graph showing share of CPI categories with rising or falling inflation overlaid with line graph showing weight of items above 0.2% inflation target.

Both of our metrics show the worst monthly inflation trends in at least a year. In January, more than 80% of the index had a monthly inflation rate above 0.2%, the highest share for this metric since January 2023. Even more disturbing – 3/4ths of the CPI weighted index had rising inflation in January, an even higher share than during the peak inflation months of mid-2022. So, while overall inflation is much lower than it was then, the situation worsened substantially in January.
There is no way to sugarcoat the January numbers. They are bad, and clearly show that the disinflationary trend that we have seen over the past 18 months is running into trouble. Possibly there is a seasonality issue here; January of 2023 also showed a worsening of our scorecard metrics. But until proven otherwise, 2024 has started on the wrong track.

Analysis of Individual Components of the Consumer Price Index

Table showing 20 components of the CPI with their weight, and year-on-year and month-on-month inflation.

Sources: Bureau of Labor Statistics and RCF Calculations 1. Inflation direction indicates whether monthly inflation in January was higher or lower than monthly inflation in December. Deflation means prices fell in January vs December.


  • Of the 20 CPI components shown in our scorecard, 15 had higher monthly inflation in January than in December.  Five components had a monthly price increase greater than 1%, a diverse group that includes lodging away from home, household energy, water sewer, and trash collection, motor vehicle insurance and public transportation (including airfares).
  • Food at home prices were up just 0.4% in January compared to just a 0.1% increase in December. Food away from home prices rose 0.5% in January and are up 5.1% from a year ago.   
  • Ironically, rent inflation was stable in January, again rising 0.4%. But it is still up 6.1% compared to a year ago which combined with a similar rise in owners’ equivalent rent represented the lion’s share of the annual inflation rate.
  • Some good news. Used car prices continue to fall as did the price of motor fuel. Apparel prices also fell in January and are no higher than they were a year ago. New vehicle prices were flat in January and are up just 0.7% since last year.
  • We should note that while CPI inflation remains above 2%, the Fed’s preferred inflation measure Core PCE has been showing annualized inflation of around 2% for the past six months. The main reason for the difference between CPI and PCE is that the PCE has a lower weight on shelter costs. We will see whether the January PCE data again show this lower inflation rate or also show a step back in the inflation fight.