John Doe

By Tiffany Wilding, North American Economist, and Allison Boxer, Economist

We’ll be closely watching two key U.S. economic data releases this week: January inflation data and retail sales. Following annual revisions in the Consumer Price Index, (CPI), we expect the closely watched core component that strips out food and energy to rise 0.3% month-over-month (m/m) in January, in line with the recent pace of core inflation. We also expect retail sales to have reaccelerated in January after a softer end to 2022.

We’re looking for core CPI to rise 0.3% m/m, slightly below consensus and in line with the recent pace of core inflation. Annual revisions to the seasonal factors for CPI pointed to a somewhat stronger pace of core inflation to end the year while updated weights modestly lowered our expectations for next week’s CPI report. M/m core CPI now averaged 0.35% in the last 3 months of the year vs. 0.25% m/m before revisions. Though even after the upward revisions, the 3-month annualized pace of core CPI was 4.25%, down from 7.06% in June.

We’re also looking for retail sales to have picked up in January after 2 straight months of contraction. We think this strength likely reflects 1) a spending boost thanks to the increase in social security due to inflation indexing 2) better volumes on post-holiday promotional activity 3) more favorable seasonals relative to November and January. Headline retail sales should also be stronger thanks to a rebound in auto sales.

Similarly, industrial production is also set to reaccelerate from 2 straight months of contraction. We are looking for a very strong 1% m/m gain, partially reversing 2 straight terrible months for the manufacturing sector.