This Friday, the US Bureau of Labor Statistics will release a regular annual recalculation to update consumer price index (CPI) readings from January 2019 to December 2023 to adjust for seasonal factors.
Inflation data revisions usually don't cause much trouble, but that wasn't the case last year, which is why investors are closely watching the updated data to be released this Friday.
This Friday, the US Bureau of Labor Statistics will release a regular annual recalculation to update consumer price index (CPI) readings from January 2019 to December 2023 to adjust for seasonal factors.
In financial markets, and even at the top of the Federal Reserve, people are looking forward to what the 2023 correction will look like. Federal Reserve's Christopher Waller said three weeks ago that he will be watching this round of updates closely because it could change the current state of inflation.
At this time last year, the Bureau of Labor Statistics announced revisions to the 2022 CPI readings, showing that inflation in the last two months of last year did not slow as initially thought.
The concern now is that a similar situation may happen again this Friday, and at this point, Federal Reserve officials have indicated that they need more confidence that inflation is on a sustainable downward channel and moving towards the 2% target.
Michael Reid, an American economist at Royal Bank of New York capital markets, said: “If anything, we expect some moderate increases in the next few months of 2023. The monthly CPI growth rate was 0.3% in December and 0.1% in November.”
Reid points out that the difference between now and this time last year is that “our level of inflation in 2022 was much higher.” The amendments in November and December of that year were “more significant.”
He said Friday's data is unlikely to change the annual rate of inflation growth in the overall picture. “For me and the Federal Reserve, the preferred measure is PCE, which shows a much better improvement in inflation.”
Financial markets appear to be relatively stable until Friday's revised data and next Tuesday's January CPI readings are released. On Thursday afternoon, the three major US stock indices had mixed ups and downs, while yields on 2-year to 30-year US Treasury bonds rose slightly after another successful government auction.
Editor/Jeffrey