Look beyond eggs for the whole picture on inflation.

Inflation data came in on the hotter side for January, but the details may not be quite as hot as implied by the Consumer Price Index’s 0.467% jump from December, the biggest month-on-month (MoM) rise since August 2023. Core inflation, which excludes food and energy prices, also came in hotter at 0.446%. Supercore Services certainly contributed to Core CPI, jumping 0.76% MoM – led by components car insurance (almost 2%), airfares (1.24%), recreation (1.37%), used cars and trucks (2.19%), prescription drugs (2.49%) and internet services (1.09%). As we delve into the full data, potential catalysts for this cost surge, we believe, may be tariff expectations (on autos), wildfire-related issues (hotels, home insurance, car rentals, car insurance) and seasonals.

Supercore services contributions to core CPI

12/31/2017 to 1/31/2025

Source: Bloomberg

Items contributing to the Supercore Services 76 basis points (bps) boost, and to roughly 55% of its move higher, are:
- Auto insurance: 21bps
- Admissions: 6.4bps
- Audio and Video subscriptions: 5.9bps
- Parking: 4.7bps
- Internet: 3.7bps

Over the past 10 years, these items contributed, on average, just 8 basis points (bps) to Supercore Services inflation. But for January, we got 42bps – a whopping 500% jump.

Should we be overly egg-cited about the surge in egg prices? They are up 15.2% for the month and 53% for the year, but we believe this is all about the bird flu.

Inflation is a rate of change. One month’s print does not make a trend. We’ll be watching for evidence of such a trend change, but the ancillary evidence seems to point otherwise for now.

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