U.S. CPI Tops Estimates as Apparel Costs Jump Most in 30 Years

Core gauge advances 0.3% from prior month, above projections

Apparel index rises 1.7%, most in almost three decades

Nathan Sheets of PGIM, Michael Ashton of Enduring Investments and Bloomberg's Mike McKee look at inflation.

U.S. consumer prices rose by more than projected in January as apparel costs jumped the most in nearly three decades. The report sent Treasuries and stocks tumbling, as it added to concerns about an inflation pickup that have roiled financial markets this month.

The consumer price index rose 0.5 percent from the previous month, above the median estimate of economists for a 0.3 percent increase, a Labor Department report showed Wednesday. Excluding volatile food and energy costs, the so-called core gauge increased 0.3 percent, also above forecasts for 0.2 percent. It was up 1.8 percent from a year earlier, higher than the 1.7 percent estimate.

The yield on 10-year Treasuries rose to 2.86 percent, while U.S. stock futures fell, as the figures renewed investor concerns that the Federal Reserve will raise interest rates at a faster pace than anticipated. The data followed wage figures earlier this month sent Treasury yields spiking and started a rout in equities that pushed them into the first correction in two years.

“Some of the laws of normal economic nature seem to be reasserting themselves,” Nathan Sheets, chief economist for PGIM Fixed Income and a former Fed and Treasury official, said on Bloomberg Television.

Play the Game: American Mall

While Sheets said he wouldn’t raise his outlook for the path of inflation, the report “gives me increased confidence that we are in a place where inflation is likely to be gradually rising more or less in line with the Federal Reserve’s forecast and consistent with an economy where we are seeing diminished slack, strengthening labor markets, solid growth.”

The 1.7 percent monthly gain in apparel prices, which account for about 3 percent of the CPI, was the biggest since 1990. Women’s apparel costs jumped a record 3.4 percent, the report showed.

Inflation on the Rise

U.S. consumer prices jumped more than forecast last month

Source: Bureau of Labor Statistics

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