Economic Update 1-15

This week, we have seen the two key inflation measures released that wrap up last year’s reporting. The first release was the CPI (Consumer Price Index) for December of 2025. The monthly increase was 0.3%. Interestingly, given the earlier government shutdown, the months of October and November were skipped and will not be reported. The 0.3% figure matches that of September. The two key contributors to the continued rise in costs were shelter at 0.4% and food at 0.7%. Overall energy costs matched the CPI gain at 0.3%. The Core CPI gain (ex-food and energy) was up only 0.2% for December. This also matched the level reported for September and was slightly lower than the forecasted rise of 0.3%. On a trailing twelve-month basis, the CPI matched the forecast of 2.7%. This was somewhat below the September inflation reading of 3.0%.

Yesterday, we saw the release of the PPI (Producer Price Index) for the month of November. Considering the months of October and November were skipped in reporting the CPI, as shown above, there was no explanation given as to why November was provided for this inflation measurement. However, we are still one month behind, as normally we would be getting the December report at this time. Ok… are you confused? I can surely understand. Anyway, the November report for the PPI showed a slight gain of 0.2% when compared to the October level of 0.1%. The primary reason for the rise was a jump in goods produced of 0.9% and a rise in energy costs. Food prices were actually unchanged. The Core PPI level for the month of November was flat. This, again, was below the forecasted rise of 0.2%. On a year-over-year basis, the PPI rose by 3.0% and was somewhat above the October level of 2.8%.

Another key economic component is Retail Sales. While again lagging by a month, Retail Sales for November were up 0.6%. Gains were seen in auto sales, but not in the electric vehicle portion. Sporting goods, clothing, and general retailers were also primary contributors to this sector. This is a positive lead-in to the Christmas season of December. Hopefully, we will see those numbers soon and they confirm the strength of the consumer in the economic cycle.

The above continues to provide a positive view of the economy in terms of improving inflation levels and spending gains by the consumer. However, we are still working with less economic information as the government continues to try and catch up from the shutdown that lasted 43 days during all of October and early November. We are working to adjust our equity and fixed-income portfolios to our new expectations. Unless we see disruptions on the global front, which obviously could occur, we should have our portfolio adjustments in place by month-end.

We certainly hope your new year is starting off in a good way. The financial markets are generally positive to begin the year, and we expect that trend to continue.