U.S. monthly CPI increased in December rather than declined as originally predicted and data from the two months preceding was also revised.

The potential of higher inflation readings in the coming months, according to some analysts, was raised by the fact that U.S. monthly consumer prices increased in December rather than declined as originally predicted and that data from the two months preceding was also revised up.

According to the Labor Department's yearly adjustments of CPI data, the consumer price index increased 0.1% in December rather than declining 0.1% as stated in the previous month's report. As a result of larger revisions to the data for November, the CPI increased by 0.2% rather than the 0.1% predicted before. The CPI increased by 0.5% in October compared to the previously reported 0.4% increase.

Recalculated seasonal adjustment factors, the model the government used to remove seasonal changes from the data, were the cause of the adjustments.

This annual routine, carried out by the Bureau of Labor Statistics of the Department of Labor, covers data from January 2018 to December 2022.No revisions were made to the non-seasonally adjusted data.

According to Daniel Silver, an economist at JPMorgan in New York, "on the overall, we don't see big ramifications for our inflation prediction coming from the revised seasonal components." “However, the seasonally adjusted data's recent better trend does create some upside risk going forward”.

The CPI increased by 0.4% in December as opposed to the previously reported 0.3% when volatile food and energy prices are excluded. The so-called core CPI increased by 0.3% in November as opposed to the previous estimate of 0.2%, according to updated data. Core CPI figures for October were not updated.

The CPI's expenditure weights were also adjusted by the BLS, and they will take effect with the CPI report for January. Prior to this, the weights represented consumer expenditure in 2019 and 2020.

The percentage of housing in the CPI has increased from 43.008% to 44.384%. This showed a rise in the weight needed for shelter. From 17.737% to 16.744% of the CPI, transportation is now a major component. Food weight decreased from 13.867% to 13.531%.

A Reuters survey of experts predicts that data coming out on Tuesday will show both the core and overall CPI increasing by 0.4% in January.

However, the poll was carried out before the updated and revised seasonal adjustment parameters were made public. Since then, other economists have increased their projections, notably Morgan Stanley.

The Federal Reserve adopted an aggressive monetary policy posture in response to higher inflation, raising its policy rate by 450 basis points since last March from close to zero to a range of 4.50%–4.75%. The Fed has decreased the rate of interest rate rises in recent months.

(Reuters.com, CNN.com)