Focus on the US CPI release in 2024: Monitor inflation trends and asset fluctuations

Why Will the US CPI Data in 2024 Become a Market Focus?

The monthly release of US CPI often triggers sharp fluctuations in global asset prices. This is not only because it is the most direct indicator of US inflation but also because it directly influences Federal Reserve policy decisions. As a barometer of consumer price changes, every percentage point change in US CPI can alter market expectations for the pace of rate cuts.

In comparison, US PCE, although released later, is considered the primary reference for Fed decision-making due to its chain-weighted averaging method that better reflects substitution effects among goods. In other words, CPI is the earliest signal the market sees, while PCE is the Fed’s final decision basis.

Detailed Schedule for US CPI Release in 2024

US CPI is usually released on the first business day of each month or the closest business day. Due to seasonal time shifts, release times may vary:

Investors should pay close attention to the transition periods between daylight saving time and standard time to ensure they do not miss key CPI release moments.

How Do the Three Major Inflation Indicators Differ?

CPI vs Core CPI: Inclusion vs Exclusion Differences

Standard CPI includes price changes for all consumer items, including volatile food and energy. Core CPI excludes these two, providing a clearer view of underlying price trends.

In periods of high oil prices, core CPI often better reflects true inflationary pressures, as large fluctuations in energy prices can mask the actual increases in other consumer goods.

CPI vs PCE: The Fundamental Difference in Weighting Methods

CPI uses a Laspeyres (fixed-base) weighting method, while PCE employs a chain-weighted approach. The latter can dynamically reflect substitution behavior—when oil prices rise, consumers reduce crude oil consumption and switch to other energy sources. This change is immediately reflected in PCE, creating a “peak shaving” effect.

Therefore, PCE tends to be more moderate and less volatile than CPI.

Monthly Growth Rate vs Annual Growth Rate: The Choice of Time Dimension

The annual growth rate compares the current month to the same month last year, eliminating seasonal factors and more stably reflecting actual price trends. The monthly growth rate is more sensitive and prone to seasonal fluctuations.

For investors, the US CPI annual growth rate and US PCE annual growth rate are the two most important metrics. The former is released earliest and garners the most market attention; the latter, though lagging, is more scientific and forms the basis for Fed decisions.

Composition of US CPI and Investment Focus

US CPI consists of multiple sub-components, with approximate weights in the total index:

• Housing costs (including rent): 30~40%
• Food and beverages: 13~15%
• Education and communication: 6~7%
• Medical healthcare: 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 and food together account for nearly 50%, making them key entry points for analyzing CPI trends. Significant rises or falls in these two areas often signal directional changes in overall inflation.

Core Variables Driving US CPI in 2024

Impact of US Election Cycle on Prices

The US presidential election will be held in November 2024. During the campaign, candidates from both parties will promise expansionary policies, potentially increasing policy stimulus and exerting upward pressure on prices. Additionally, as de-globalization accelerates and trade barriers rise, import costs will also reflect in consumer prices.

Market Expectations for Fed Rate Cuts

According to CME Group probability forecasts, the market expects the Fed to cut rates by 6 basis points before the end of 2024, the highest probability. This expectation aligns with the market’s view that US CPI will decline throughout the year—only with persistent downward inflation can the Fed significantly cut rates.

Transmission Mechanism of Global Logistics and Geopolitical Conflicts

Since late 2023, the Red Sea crisis has caused shipping companies to bypass the Suez Canal, doubling freight rates on Asia-Europe routes in the short term. Although the impact is less severe than the “Ever Given” incident in 2021, regional logistics disruptions will ultimately reflect in consumer prices. This remains a long-term risk factor to monitor.

Lessons from Historical Cycles: Four Waves of Inflation Fluctuations

Over the past thirty years, the US has experienced four distinct CPI cycles:

First (July 1990 – March 1991): Savings and loan crisis combined with Gulf War oil shock led to recession.

Second (September 2000 – October 2001): Dot-com bubble burst and 9/11 terrorist attacks triggered economic downturn.

Third (January 2008 – June 2009): Subprime mortgage crisis exploded, plunging the US into a deep recession.

Fourth (March 2020 – Present): COVID-19 pandemic caused CPI to fall rapidly; massive Fed stimulus triggered high inflation in 2021–2022. As the pandemic recedes and logistics recover, CPI has gradually declined from its June 2022 peak.

This cycle teaches us that the impact of global logistics on US inflation is often underestimated. Whether due to pandemic disruptions, canal blockages, or geopolitical conflicts, rising logistics costs eventually feed into end-user prices.

2024 US CPI Trend Forecast Framework

Fundamental Analysis: US Economy Remains Resilient

According to the latest IMF forecast, US economic growth in 2024 will be 2.1%, ranking among the top among major developed countries. This indicates the US economy still has some inflation resistance and is unlikely to experience deep deflation.

In contrast, the Eurozone’s growth is only 0.9%, and global inflation is expected to fall from 5.8% in 2024 to 4.4% in 2025.

Commodities and Low Base Effect

Due to crude oil and other commodities mainly oscillating downward in the first half of 2023, US CPI in the first half of 2024 faces a low base effect and is unlikely to accelerate further downward. Meanwhile, oil inventories are in a declining cycle, supporting oil prices and limiting further CPI decline.

Overall Forecast: A “V” Shape Throughout the Year

Considering all factors, we believe US CPI in 2024 may exhibit the following characteristics:

• Bottom in Q1: Completing the final phase of the previous decline
• Rebound in Q2: Resonance of election policies, rising logistics costs, and low base effects
• Decline in H2: With the Fed possibly starting rate cuts, inflation expectations will cool again

This trajectory could exert some pressure on the stock market, as the CPI rebound in the first half may delay the Fed’s rate cut start.

Key Action Items for Investors

1. Mark CPI release times: Especially the transition points between daylight saving time and standard time
2. Monitor CPI and PCE simultaneously: CPI influences short-term market sentiment; PCE guides Fed policy
3. Focus on energy and housing components: These two account for nearly 50% of CPI weight
4. Track commodity prices: Especially crude oil inventories and shipping indices
5. Prepare for policy changes: Fed’s rate cut expectations are a key variable for asset prices in 2024

Every CPI release is an opportunity for the market to reprice. Understanding its trend logic and drivers is essential for investors to grasp market rhythm.