(CEP News) - Core U.S. inflation is expected to remain largely unchanged in January, with the U.S. economy in recession.

After hitting highs in the summer of 2008, “the rapid turn in energy and commodity prices and a global recession combined to thrust inflation lower,” economists at Wachovia said.

Core inflation is expected to increase 0.1% after a flat reading in December. Annual core inflation is expected to grow 1.5% after a 1.8% jump in December.

Economists at IHS Global Insight said the monthly core index will be largely unchanged, with an increase in services prices cancelling out a decline in goods prices.

The headline index, which includes food and energy, is expected to increase 0.3% month-over-month after a 0.8% drop in December.

The expected jump has been blamed on climbing gas prices in January.

“The average price of a gallon of gasoline rose by 6.1% during the month, and, on the anecdotal level, we happen to know more consumers who purchase gasoline than that buy drums of crude,” said Guy LeBas, strategist at Janney Fixed Income, referring to the drop in crude oil prices in January.

Indeed, the price of a gallon of gas grew from around $1.59 during the holidays to $1.90 more recently.

LeBas said rising gasoline prices could be balanced out by lower retail prices, with U.S. retailers discounting sharply to boost dwindling sales.

He said the contribution of rent prices to the figure is a wild card. Rent prices have been volatile in recent months, he said.

By Megan Ainscow, mainscow@economicnews.ca, edited by Sarah Sussman, ssussman@economicnews.ca

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Posted in Categories: Economy, Releases, USA.

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