How will the US CPI trend look in 2024? An article explaining the CPI release schedule and its market impact

CPI Release Schedule: Essential Information for Investors

When it comes to investment opportunities in 2024, the US CPI release schedule has become a “red dot” on many traders’ calendars. This is no coincidence—the US Consumer Price Index not only serves as the most direct indicator of inflation but also plays a crucial role in Federal Reserve decision-making, thereby influencing global asset prices.

The US CPI release dates tend to be quite regular: announced on the first business day of each month or the closest business day. However, due to time zone differences, Taiwanese investors need to pay attention to the distinction between daylight saving time and standard time. During daylight saving time, the release is at 20:30 Taiwan time; during standard time, it is at 21:30.

The complete 2024 US CPI release schedule (Taiwan time) is as follows:

• January 11 at 21:30 / February 13 at 21:30 / March 12 at 21:30
• April 10 at 20:30 / May 15 at 20:30 / June 12 at 20:30
• July 11 at 20:30 / August 14 at 20:30 / September 11 at 20:30
• October 10 at 20:30 / November 13 at 21:30 / December 11 at 21:30

Why Are There Three Indicators: CPI, Core CPI, and PCE?

Inflation data may seem simple, but it’s actually quite complex. The main indicators circulating in the market fall into two categories: CPI series and PCE series, each with core and non-core versions. So, what’s the difference?

The fundamental difference between CPI and Core CPI lies in whether food and energy are included in the calculation. Traditional CPI includes all consumer goods price changes, meaning that soaring oil prices or poor harvests directly push the index higher. Core CPI, on the other hand, “subtracts” these volatile items, focusing on the actual trend of prices for other goods and services.

CPI and PCE are calculated differently. CPI uses a Laspeyres weighted average, while PCE employs a chain-weighted approach. This technical difference means that PCE better reflects consumers’ substitution effect when prices rise. For example, when oil prices surge, consumers tend to switch to other energy sources, causing PCE to automatically reduce the weight of crude oil, smoothing out fluctuations.

Year-over-year vs. month-over-month rates: The annual rate compares to the same period last year, effectively excluding seasonal factors and providing a more stable reflection of price trends. Investors generally pay more attention to the year-over-year data.

The Two Most Important Data Points to Track

Among many indicators, the market and policymakers each have their “favorites”:

US CPI Year-over-Year Rate: This is the earliest inflation data released, with high market attention often leading to significant asset price volatility.

US PCE Year-over-Year Rate: Although released slightly later, this is the “true reference” for the Federal Reserve. The Fed’s interest rate decisions are primarily based on PCE rather than CPI.

Interestingly, these two data points tend to move in the same direction and are close in magnitude. This means the market reacts to the earlier CPI data, while policymakers wait for the PCE data before taking action.

What Does the US CPI Include?

Understanding the components of CPI helps in predicting its future trend. Data at the end of 2023 shows the main components as follows:

• Housing (including rent): 30-40% (largest share)
• Food and beverages: 13-15%
• Education and communication: 6-7%
• Healthcare: 7-9%
• Energy: 6-8%
• Transportation services: 5-6%
• New vehicles: 3-5%
• Leisure and entertainment: 3-5%
• Used cars: 2-3%
• Clothing and apparel: 2-3%

Investors should focus on the two largest weights—housing and food—as their price fluctuations are often decisive factors in CPI movements.

What Forces Will Drive US CPI in 2024?

The factors influencing US CPI are complex and intertwined, but two “major players” are especially important in 2024.

Force One: Political Cycles During the US Election Year: Presidential elections tend to bring excessive promises and policy swings. Under current international circumstances, incumbents are motivated to shift domestic tensions outward, which could escalate geopolitical conflicts and promote trade protectionism, ultimately making it difficult for prices to decline smoothly.

Force Two: The Federal Reserve’s Rate Cut Pace: According to the latest probability data from CME Group, the market generally expects the Fed to cut rates six times in 2024. This expectation itself reflects the market’s view that US CPI will trend downward throughout the year—though there may be a rebound in Q2, the overall direction is downward.

Four Major CPI Fluctuations in History

Looking back over the past three decades, the US has experienced four significant CPI cycles, each accompanied by economic events:

1990-1991: Savings and loan crisis combined with Gulf War oil shock led to recession, causing CPI to decline.

2000-2001: Dot-com bubble burst and 9/11 attacks hurt the US economy, leading to lower CPI.

2008-2009: Subprime mortgage crisis erupted, plunging the economy into recession, with CPI dropping sharply.

2020-present: COVID-19 pandemic caused economic standstill, with CPI initially plummeting, then soaring due to massive Fed stimulus in 2021. After peaking in June 2022, CPI gradually declined as the pandemic eased and supply chains recovered.

An unexpected insight from this history is that global logistics efficiency has a far greater impact on US inflation than previously thought. The crisis in the Red Sea at the end of 2023 reaffirmed this—Houthi attacks forced shipping companies to reroute around the Red Sea, causing Eurasian shipping rates to surge over 200%. While the ongoing impact isn’t as severe as the Suez Canal “Long Cistern” grounding in 2021, regional logistics disruptions will eventually be reflected in consumer prices.

2024 US CPI Outlook: Bottoming Out, Rebound in Q2

Predicting CPI trends depends heavily on the US economy’s performance. The latest forecast from the International Monetary Fund ((IMF)) projects US GDP growth at 2.1% in 2024, slowing to 1.7% in 2025. Among major global economies, the US remains among the fastest-growing, implying that inflation will not decline significantly.

Key factors to consider for 2024 CPI trends include:

Diminishing Base Effects: Due to sustained declines in commodities like crude oil in the first half of 2023, the “comparable base” was relatively low, which may delay the downward momentum of CPI in early 2024—possibly keeping it high. Additionally, oil inventories are currently declining, supporting oil prices.

Overall Outlook: US CPI is likely to hit its annual bottom in Q1, rebound in Q2, and then decline again in the second half. Coupled with geopolitical risks during election year and shipping cost pressures, a “U-shaped” trend for CPI throughout the year is quite probable.

This is not good news for US growth stocks—the more persistent inflation is, the more limited the Fed’s room to cut rates.

Summary: CPI Release Schedule Is a Must-Watch for 2024

Understanding the US CPI release schedule, grasping the meaning of each indicator, and recognizing the impacts of logistics and political cycles are key to navigating the big picture in 2024. While the year-over-year CPI can be volatile, it remains the most direct market response tool; PCE is the Federal Reserve’s true decision guide. Overall, inflation’s “stickiness” appears stronger than expected, and this should be incorporated into your investment decision framework.