🇺🇸 So the big red flag was supposed to be in Supercore CPI, otherwise known as Core services exempting shelter.

Throw in some random goods and toss out whatever goods have inflated most, and you have Paul Krugman's favorite inflation indicator du jour.

As you can see, the story of Supercore is really in transportation services. This was also the biggest category of increase in the CPI overall, but it has an outsized influence on Supercore. 0.32 of that 0.59% MoM increase was transportation.

The prime driver was airline fare, which came in at 6.5% MoM, likely an annual increase. Motor vehicle fees also got their CPI-indexed bump this January. Motor vehicle insurance, on the hand, fell 0.4%, correcting for serious price inflation over the past few years. Maintenance & repair of vehicles was essentially flat at +0.1% (but 4.9% YoY).

Supercore is very much tied to wage inflation, and Supercore being where the Fed tries to avoid stickiness, one would expect Powell to point to this while refusing to cut further. Wage-price spirals, and all that nonsense; you'll probably hear the phrase if present trends continue into the February numbers.

They're up 1.9% YoY (stemming from a 1.2% increase in pay and a 0.6% increase in the average work week), but that pales in comparison to the damage that was done this decade.

📊 I N T E L R U N N E R 📊

🇺🇸 Other Notable CPI Categories (Energy & Shelter)

⚡️ Electricity is up 6.3% year over year in January 2026, dwarfing the 2.4% headline rate despite being down from 6.7% in December. This is largely attributable to the AI data center boom being foisted upon the country (as I pointed out back then), and it isn't transitory. Gas utility prices are up about 10% annually.

That 1.2% raw increase in wages and salaries doesn't look so hot in this context, does it?

⛽️ Gasoline was down 4.3% year over year. That's substantial, but it's also a bit of an artefact given the recent upswing in oil prices (and, moreover, the geopolitical tension underlying it).

The pattern is clear: consumer spending is shifting away from the elective motor fuel (driving less, fuel efficiency) and toward the unavoidable (electricity, heating). This isn't the best sign amidst the otherwise positive 1.6% YoY decline in energy broadly.

🏘 We have to look at shelter because it's almost a quarter of the index, even though it's a horrible laggard (8-14 months) and isn't very useful.

Shelter was up 0.2% month over month, both in Rent of Primary Address and Owners' Equivalent, and 3% year over year. That's not good but it's not bad. We're still cooling off the 8%+ peak in early 2023.

In a nutshell, it's more of the same. The worst hit categories are the ones the Fed contrives reasons to pay the least attention: necessities. And thus the regressivity of inflation continues to bite the least amongst us most...

If you ask me, that's the red flag.

🚩 I N T E L R U N N E R 🚩