A new federal report found the annual U.S. inflation rate continued to ease in January, ticking down to 3.1% from December’s 3.4% rate, but overall prices on goods and services were up .3% for the month, outpacing most economists’ expectations.

The core inflation metric, which strips out volatile food and energy prices, rose .4% from December to January but matched the annual rate of the previous month at 3.9%.

The Labor Department’s Consumer Price Index Summary for January notes still accelerating prices for housing accounted for much of the January increase as those costs moved up .6% on a monthly basis and are up 6% over the same time last year. Food costs also moved up in January with both the groceries and food away from home categories increasing by .4%.

While overall inflation rose, energy prices continued to tick down in January including gasoline costs, which slid 3.3% from December and 6.9% from 12 months ago.

The Mountain West group of states, which includes Utah, saw regional inflation running just a bit below the national average in January at 3.0%.

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U.S. investment markets reacted negatively to the new inflation data, which came in higher than the 2.9% that was widely expected, and all three major stock indexes were down at the end of regular trading Tuesday.

“Inflation is generally moving in the right direction,” Lisa Sturtevant, chief economist at Bright MLS, told CNBC. “But it’s important to remember that a lower inflation rate does not mean that prices of most things are falling — rather, it simply means that prices are rising more slowly. Consumers are still feeling the pinch of higher prices for the things they buy most often.”

In spite of the prices on most goods and services still marching up on a monthly basis, tracking by the University of Utah’s Kem C. Gardner Policy Institute finds Utahns’ collective outlook on the economy rose in January and continues to track well ahead of the rest of the country.

Utah’s consumer sentiment rose 2.0% in January (from 79.8 in December to 81.3), according to the Kem C. Gardner Policy Institute’s Survey of Utah Consumer Sentiment. A similar survey by the University of Michigan found that sentiment rose 13.3% among Americans as a whole during the same time, jumping from 69.7 to 79.0. 

“Utah consumer sentiment begins 2024 continuing its upward trend with a third consecutive monthly increase, reaching its highest rating since October 2021,” according to Gardner Institute chief economist Phil Dean. “This recent trend signals growing economic optimism and coincides with the remarkable resiliency seen in the Utah and U.S. economies over the past few years.

“Despite higher interest rates and global uncertainty caused by wars and trade conflicts, the remarkably resilient economy expanded in all four quarters of 2023, buoyed by strong labor markets, continued robust consumer spending, and elevated-but-moderating inflation. Notably, with sizable U.S. consumer sentiment increases in the past two months, U.S. sentiment is closing the gap with Utah consumer sentiment, which tracks directionally but has historically exceeded U.S. sentiment.”

January’s higher-than-expected inflation data is likely to bolster the Fed’s current position to hold its benchmark federal funds lending rate at 20-year highs as it waits for “greater confidence” that the economy is headed toward its target rate of 2% annual inflation.

At the conclusion of its January meeting, the Fed’s Open Market Committee voted to leave its the rate unchanged, but Fed Chairman Jerome Powell signaled that reducing the current rate of 5.25% to 5.5% is still likely to happen sometime this year, though it will probably be later than the Fed’s next meeting in March.

“We have confidence,” Powell said during a press conference following the two-day meeting. “We’re looking for greater confidence that inflation is moving down to 2%. It seems to be the likely case that we will achieve that confidence.”

Interest rate adjustments are the Fed’s primary weapon in an ongoing battle against the elevated prices of consumer goods and services. While the monetary body has paused making any rate adjustments since its July 2023 meeting, it had assessed 11 increases going back to March 2022, the most aggressive series of rate hikes in decades.

The rate increases raise the cost of debt for businesses and consumers, a move that aims to reduce the amount of spending and overall economic activity. That shift in dynamics typically brings inflation rates down.