Pandemic still weighing on US inflation

Travel related price inflation falls again in January

Chart of the Day

US inflation was unchanged at 1.4% in January, as rises in inflation for energy and apparel were offset by falls in travel-related prices. Although it was unchanged in January, inflation will rise in the coming months for mechanical reasons, because the annual comparison will be with the huge falls in prices last year.


The key for Fed officials will be working out how much of that is signal and how much noise. Firms say cost pressures have been rising, but again the surveys are based on lower prices last year.

The key surprise in January was that core inflation fell. Even the Cleveland Fed’s measures - which are less volatile than the traditional core measure - declined, although they remain around 2%.

The weekly EIA report showed a big draw in crude inventories, which are now only just above their normal average for this time of year - no wonder prices are rising.


Though prices were little changed yesterday, Nasdaq trading volumes have picked up sharply. Volumes are still far larger than for the S&P 500.

The ratio of the S&P 500 financials to tech sector remains lower than at the start of the year. The ratio often rises when expectations for global growth improve, but isn’t reacting much this time.

That’s partly because financials are failing to make much headway. Unlike the broader S&P 500, they are only just back to their levels at the start of 2020. In the eurozone, the sector has done much better.

Semiconductor stocks have been putting in a mixed performance despite worldwide shortages. The top performer, Nvidia, appears to have broken out of the range its been in for the past six months or so, but AMD and Intel are not there yet.

Platinum has been another top performer. Some say its recent jump is because of concerns about Covid and delays in vaccinations in South Africa, a key source of the metal.

The rise yesterday means platinum is now up by almost 20% in the past month, outperforming most commodities.

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