Unemployment RateThe euro zone unemployment rate was unchanged at a record low in November as expected, with the absolute number of people without a job falling slightly further, according to European Union statistics office Eurostat.
Eurostat said the unemployment rate in the 20 countries that now share the euro currency in November 2022 will be 6.5% of the workforce, the same as in October and in line with forecasts of economists polled by Reuters.
However, in absolute terms, the number of people without work fell to 10.849 million in November from 10.851 million in October in a sign the labor market is still tightening despite economists' forecast of a technical recession from the last quarter of 2022.
Inflation Rate (YoY)US consumer prices fell for the first time in more than 2.5 years in December as gasoline and motor vehicle prices fell, raising hopes that inflation is now on a continuing downward trend, although the labor market remains tight.
Americans were also helped by prices in supermarkets last month, with a report from the Labor Department showing food prices posting their smallest monthly increase since March 2021. But rents remain sky-high and utilities are more expensive.
Cooling inflation could allow the Federal Reserve to further reduce the pace of interest rate hikes next month. The US central bank is engaged in the fastest rate hike cycle since the 1980s. Fed officials welcomed the slowdown, with Patrick Harker of the Philadelphia Fed saying "a 25 basis point increase would be appropriate going forward," in his view.
The consumer price index fell 0.1% last month, its first decline since May 2020, when the economy reeled from the first wave of COVID-19 cases. CPI rose 0.1% in November.
Excluding food, shelter and energy, prices fell for the third straight month.
Gasoline prices plunged 9.4% after dropping 2.0% in November. But natural gas costs were up 3.0%, while electricity was up 1.0%.
Food prices rose 0.3%, the smallest gain in almost two years, after rising 0.5% the previous month. The cost of food consumed at home increased 0.2%, also the lowest since March 2021. Prices for fruit and vegetables fell as did those for dairy, but meat, poultry and fish were more expensive. Egg prices jumped 11.1% due to bird flu.
In the 12 months to December, CPI increased 6.5%. This is the smallest increase since October 2021 and follows November's 7.1% rise. Annual CPI peaked at 9.1% in June, which was the biggest increase since November 1981. Inflation remains well above the Fed's target of 2%.
Excluding volatile food and energy components, CPI rose 0.3% last month after rising 0.2% in November. In the 12 months to December, core CPI rose 5.7%. This is the smallest increase since December 2021 and follows November's 6.0% rise.
Used car and truck prices fell 2.5%, recording the sixth straight monthly decline. New motor vehicles fell 0.1%, dropping for the first time since January 2021.
Core goods prices fell 0.3%, dropping for the third month in a row. Clothing prices rose even though retailers offered discounts to clear excess inventory. While goods deflation became entrenched, services, the biggest component of the CPI basket, accelerated 0.6% after rising 0.3% in November.
Core services, which exclude energy, rose 0.5% last month after rising 0.4% in November.
They are driven by stubborn rents. Owner-equivalent rent, a measure of the amount homeowners pay to rent or earn from renting their property, jumped 0.8% after rising 0.7% in November. However, independent calculations show rent inflation is cooling.
The rent measure in the CPI tends to be late compared to the independent measure. Healthcare costs rose 0.1% after two straight monthly declines. Excluding the rental housing factor, services inflation jumped 0.4% after being unchanged in November.
With labor costs accounting for around two-thirds of the CPI, Fed officials will want to see more convincing evidence of easing price pressures before halting rate hikes.
Michigan Consumer SentimentUS consumer sentiment hit its strongest record in eight months at the start of the year as falling energy prices eased worries about inflation, according to a closely watched survey released on Friday.
The University of Michigan's index of consumer sentiment rose to 64.6 in January, the highest since May, from 59.7 in December, with assessments of current and future conditions improving sharply for the month.
The change in tone is partly due to the perception that inflation is easing – even if only in the short term. 12-month inflation expectations fell to 4.0% from 4.4% a month earlier, but respondents were more concerned about the longer-term outlook: average inflation expectations over the next five years actually rose 0.1% to 3.0% from 2 .9% , clearly above the Federal Reserve's 2% target.
The relatively solid Michigan survey contradicts some other gauges of consumer sentiment, such as the Redbook study, where there has been a more pronounced decline in the desire to shop. Shepherdson noted that the Michigan survey is more likely to correct down given signs of slowing growth in the job market.
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