2024 US Consumer Price Index Trend Analysis: A Market Guide from Prediction to Implementation

Why US CPI Data Moves Global Asset Prices

The US Consumer Price Index (CPI) is a key indicator of inflation, reflecting not only the health of the US economy but also triggering sharp fluctuations across global asset classes. Compared to the PCE data that the Federal Reserve uses for decision-making, the US CPI is released earlier, so markets tend to pay close attention to this data beforehand and adjust investment strategies accordingly. In short, fluctuations in CPI data directly influence the price trends of stocks, bonds, and commodities.

2024 US CPI Release Schedule

US CPI data is released monthly on the first business day or the closest business day, with specific times adjusted for daylight saving time:

During standard time (November to March), release time is 21:30 Taiwan Time; during daylight saving time (April to October), it is 20:30.

US CPI, Core CPI, and PCE: The Fundamental Differences Among the Three Major Indicators

There are multiple inflation measures circulating in the market, but investors should focus on these three:

Difference between CPI and Core CPI

Standard CPI includes price changes for all goods and services, including volatile food and energy prices. This makes CPI data susceptible to short-term shocks and more volatile. Core CPI excludes food and energy, providing a more stable reflection of the underlying price trends of other consumer goods and is considered a better indicator of economic health.

Methodological differences between CPI and PCE

CPI uses Laspeyres weighting, while PCE employs chained weighting. The latter can more sensitively capture consumer substitution behavior when prices rise sharply—for example, when oil prices surge, consumers may choose alternative energy sources, automatically reducing the weight of oil in the basket. This “smoothing” characteristic makes PCE better at reflecting true inflation pressures, which is why the Fed prefers PCE.

Year-over-year vs. Month-over-month: The time dimension

Year-over-year compares the current month’s data with the same month last year, eliminating seasonal effects and more stably reflecting actual price trends. Investors should focus on the US CPI Year-over-Year and US PCE Year-over-Year: the former is released earliest and can cause significant market volatility; the latter is released slightly later but is the primary basis for Fed policy decisions.

Dissecting the Structure of US CPI: Finding Breakthroughs in Prediction

To understand CPI trends, one must understand its internal composition. The main components and their approximate shares in 2024 are:

• Housing (including rent): 30~40%
• Food and beverages: 13~15%
• Education and communication: 6~7%
• Medical care: 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%

Housing costs have the largest share, followed by food and beverages. Price movements in these two categories often determine the overall CPI’s rise or fall. When these costs increase, the overall CPI tends to stay elevated; when they decrease, CPI tends to ease.

Two Major Variables That Will Decide US CPI Trends in 2024

First Variable: Political risk premium from the US elections

The US presidential election will be held in November 2024. Regardless of which party wins, candidates tend to overpromise on economic policies. Against the backdrop of escalating geopolitical conflicts, this could trigger a new wave of protectionism and accelerate de-globalization. The result would be rising domestic manufacturing costs and supply chain expenses, ultimately pushing up consumer prices. This suggests that inflation in 2024 may be difficult to achieve a smooth downward trajectory.

Second Variable: The magnitude and pace of Fed rate cuts

According to CME Group data, the market expects the Fed to cut interest rates by a total of 6 basis points in 2024. This expectation is based on the belief that US CPI will trend downward throughout the year. However, from a fundamental perspective, the situation could be more complex.

A 30-Year Perspective: Historical Lessons from Four US CPI Cycles

Since the 1990s, the US has experienced four distinct CPI fluctuation cycles, each associated with major economic events:

First cycle (July 1990 – March 1991)
Savings and loan crisis and Gulf War led to oil price pressures; US entered recession, CPI declined.

Second cycle (September 2000 – October 2001)
Dot-com bubble burst and 9/11 attacks caused economic shocks, leading to a decline in inflation.

Third cycle (January 2008 – June 2009)
Subprime mortgage crisis triggered a severe recession, CPI dropped rapidly.

Fourth cycle (March 2020 – present)
COVID-19 pandemic caused global economic standstill, CPI fell sharply to mid-2020. Subsequently, the Fed launched large-scale stimulus, pushing CPI to nearly a 40-year high by June 2022. In 2023, as the pandemic receded and global logistics recovered, CPI declined again.

Underestimated Driver of Inflation: Logistics Costs

During the COVID-19 pandemic and the Suez Canal incident in 2021, global logistics were severely disrupted, raising transportation costs and consumer prices. At the end of 2023, tensions in the Red Sea again disrupted shipping routes. The ongoing threat from Houthi forces forced ships to reroute, causing container shipping prices in Eurasian routes to surge over 100% within weeks.

This rise in logistics costs will eventually pass through to end consumer prices. Compared to the second wave of COVID-19 at the end of 2020 or the Ever Given incident in 2021, the short-term impact on container freight rates is limited, but regional logistics disruptions and long-term cost increases should not be underestimated.

Fed Policy Expectations and US CPI in 2024: Their Interplay

The Fed’s interest rate decisions and CPI trends form a feedback loop. When CPI exceeds expectations, the Fed tends to keep rates high or even hike further, suppressing demand and lowering prices; when CPI is below expectations, the Fed may cut rates to stimulate the economy. The market’s expectation of a 6 basis point rate cut in 2024 reflects optimism about a mild decline in prices, but this outlook depends on economic fundamentals.

Impact of Global Economic Growth on US CPI

The IMF’s latest forecast shows global GDP growth of 3.1% in 2024, with the US at 2.1%, ranking second among major economies. The relatively strong US economy implies resilient employment, with wage pressures persisting, supporting consumption and prices. This makes it difficult for inflation to quickly fall back to the Fed’s 2% target.

In contrast, the Eurozone’s growth is only 0.9% in 2024, indicating sluggishness. Global inflation is expected to drop from 5.8% in 2023 to 5.8% in 2024 (due to the relative strength of the US), and further down to 4.4% in 2025.

Segmental Forecast of US CPI in 2024

Q1: Bottoming out phase
Due to commodity prices (especially crude oil) declining in the first half of 2023, US CPI in Q1 2024 is unlikely to continue dropping rapidly because of low base effects. Current crude inventories are still declining, supporting oil prices. Overall, CPI is expected to hit its annual low in Q1.

Q2: Rebound phase
Political uncertainties surrounding the US election, escalations in global conflicts disrupting shipping, and tight oil supplies will push CPI higher in Q2.

H2: Resumption of decline
Absent major black swan events, CPI is expected to re-enter a downward trajectory in the second half, though the decline will be limited.

Core Insights for Investors

In 2024, US CPI is expected to follow a “V” shape: bottom in Q1, rebound in Q2, and mild decline in H2. This outlook will exert pressure on US stocks because:

1. Interest rate expectations adjustment: If CPI rebounds, Fed rate cut expectations may diminish, putting pressure on valuations.
2. Rising real interest rates: Nominal rates may not fall significantly, and sticky inflation makes real rates hard to decline.
3. Sector rotation acceleration: High-growth tech stocks may face pressure, while energy and defensive sectors could benefit.

Investors should closely monitor monthly US CPI releases and Fed statements to dynamically adjust their portfolios.