How to interpret inflation data? Understanding the investment logic behind the 2024 US CPI trend

Why Is the US CPI Release Time So Important?

The reason the US CPI release time attracts so much market attention is its “early release” characteristic. As a key indicator reflecting inflation, the US CPI is published on the first business day or the closest business day each month. Compared to the PCE data that the Federal Reserve uses for decision-making, CPI is released earlier, often serving as a trigger for asset price fluctuations.

Due to seasonal differences, the US CPI release time varies in Taiwan time—during daylight saving time at 20:30, during standard time at 21:30. The specific CPI release times for 2024 (Taiwan time) are as follows:

• January 11 at 21:30, February 13 at 21:30, March 12 at 21:30
• April 10 at 20:30, May 15 at 20:30, June 12 at 20:30
• July 11 at 20:30, August 14 at 20:30, September 11 at 20:30
• October 10 at 20:30, November 13 at 21:30, December 11 at 21:30

Each CPI release can trigger re-pricing of major asset classes.

With so many inflation indicators, which should investors focus on?

The US inflation data system is quite complex. Besides the basic CPI, there are derived measures like core CPI, PCE, and others. Clarifying the differences among these indicators is essential for correctly interpreting market signals.

The core difference between CPI and core CPI lies in coverage. CPI includes price changes for all consumer items, making it sensitive to fluctuations in food and energy prices; core CPI excludes these two volatile categories, better reflecting underlying inflation pressures.

The difference between CPI and PCE lies in calculation methods. CPI uses a Laspeyres weighting scheme, while PCE employs chain-weighting. This means PCE can better capture consumer substitution behavior—such as switching to alternative energy sources when oil prices surge. The weight adjustments in PCE provide a more forward-looking perspective.

In practical terms, the market mainly focuses on two lines: the US CPI year-over-year growth rate and the US PCE year-over-year growth rate. The former tends to cause the largest volatility due to its early release, while the latter influences long-term policy decisions by the Fed.

The underlying logic behind CPI composition

To forecast CPI trends, understanding its components is necessary. The main categories and their approximate shares are:

• Housing costs (including rent): 30-40%
• Food and beverages: 13-15%
• Energy: 6-8%
• Medical care: 7-9%
• Education and communication: 6-7%
• Transportation services: 5-6%
• Leisure and entertainment: 3-5%
• New vehicles: 3-5%
• Clothing: 2-3%
• Used cars: 2-3%

Housing and food are the largest components, making them key focus areas when analyzing CPI trends.

How will the CPI evolve in 2024? Two main driving forces

Driving force one: US economic growth remains high

According to the latest IMF forecast, the US economy will grow by 2.1% in 2024, ranking second among major global economies. Resilient economic growth suggests strong consumer demand, which limits downward pressure on prices. Meanwhile, global growth is projected at 3.1%, with global inflation expected to fall from high levels to 5.8%, though still not low.

Driving force two: Structural changes in commodity inventories

In the first half of 2023, commodity prices mostly declined with volatility, which may make it difficult for US CPI to continue falling rapidly in the first half of 2024 due to a “low base” effect. More importantly, crude oil inventories are currently decreasing, providing support for oil prices—this contrasts sharply with the easing supply in 2023.

Hidden impacts of geopolitical risks and logistics costs

Over the past thirty years, the US has experienced four economic cycles (1990-1991 Savings & Loan crisis, 2000-2001 dot-com bubble, 2008-2009 subprime crisis, 2020 COVID-19 pandemic). An often overlooked but significant finding is that global logistics conditions have a much greater impact on US CPI than expected.

The end-of-2023 “Red Sea crisis” reaffirmed this. Shipping companies rerouted to avoid safety risks, causing Asian-European shipping rates to more than double. Although the impact is less severe than the 2021 Ever Given incident, regional logistics disruptions will eventually show up in consumer prices. Coupled with potential trade policy changes and geopolitical tensions during the 2024 US election, rising logistics costs should not be underestimated.

The projected path of US CPI in 2024

Based on the above analysis, US CPI in 2024 is expected to follow this trend:

Bottom in Q1—due to base effects and low inventories, inflation will struggle to decline rapidly in the first half;

Rebound in Q2—increased uncertainty from election policies and intensified geopolitical disruptions may push prices higher;

Decline in H2—as base effects fade and economic growth slows, CPI will face downward pressure again.

Overall, US CPI will likely fluctuate at high levels, making it difficult to quickly return to the Fed’s 2% target, exerting ongoing valuation pressure on US stocks.

Conclusion

Understanding the timing of the US CPI release and the underlying data logic is key to grasping asset allocation directions in 2024. The market focuses on CPI because it is released earliest, while the Fed emphasizes PCE for its scientific basis. Nonetheless, the true drivers of inflation stem from three dimensions: economic growth, commodity supply, and global logistics. Amid the US election year and rising geopolitical risks, CPI trends will remain highly uncertain, requiring investors to stay alert and prepared for each release.