“It’s not whether you’re right or wrong, but how much money you make when you’re right and how much you lose when you’re wrong” — George Soros

1. Inflation Heated Up in January, Freezing the Fed — the Labor Department reported that prices rose last month 0.5% from December on a seasonally adjusted basis. That was the largest monthly increase since August 2023 and well ahead of economists’ expectations for a milder increase of 0.3%. Inflation was a significant factor in the November election. Many Americans were fed up with higher prices and thought that putting a new party in power would help. During his campaign, President Trump vowed that he would lower prices. The bigger-than-expected increase in prices last month largely reflected higher prices for used cars and auto insurance, said Omair Sharif, founder of research firm Inflation Insights. Core prices, which strip out volatile food and energy prices, rose 0.4% from December on a seasonally adjusted basis, the largest increase in nearly two years. Core inflation was 3.3% over the year.
2. Wholesale Inflation Sped Up in January With 0.4% Monthly Gain in PPI — the producer price index increased by 0.4% in January, the Bureau of Labor Statistics said on Thursday morning. That was above economists’ 0.2% consensus estimate and compares with a revised increase of 0.5% in December. The PPI was 3.4% higher than a year earlier, versus a 3.5% rise in the year through December. The core PPI, which excludes food and energy prices, ticked up 0.3% in January, matching expectations and down from an updated 0.4% rise in December. The subindex was up 3.6% from a year earlier.
The January wholesale inflation data confirm a hot start to the year on the inflation front, following Wednesday morning’s consumer price index release. BLS data showed a 0.5% rise in the CPI last month, versus the 0.3% forecast. The core CPI added 0.4%, a tenth more than expected. Those were increases of 3% and 3.3%, respectively, from a year earlier.
3. DOGE Staffer Arrives at Internal Revenue Service Headquarters — Gavin Kliger, an aide to Elon Musk in his effort to overhaul spending across the federal government, visited the District of Columbia offices to examine IRS systems, the people said. Kliger has been working at the Office of Personnel Management, the government human-resources operation that has been heavily involved in Musk’s work to reduce the size of the government. Kliger has asked for meetings with senior officials and was interested in the agency’s head count, according to an IRS employee. The IRS has about 100,000 workers after a recent expansion. It is in the middle of the busiest portion of its year in preparation for the mid-April individual income tax filing deadline.
4. US Retail Sales Drop by Most in Two Years Amid Fires, Storms — US retail sales slumped in January by the most in nearly two years, indicating an abrupt pullback by consumers after a spending spree in the closing months of 2024. The value of retail purchases, not adjusted for inflation, decreased 0.9% after an upwardly revised 0.7% gain in December, Commerce Department data showed Friday. Excluding autos, sales dropped 0.4%.
Nine of the report’s 13 categories posted decreases, most notably motor vehicles, sporting goods and furniture stores. The data encompassed a period marked by devastating wildfires in Los Angeles — the second-largest metropolitan area in the US — and severe winter weather in other parts of the country, which could have depressed brick-and-mortar shopping activity.

The week ahead — Economic data from Econoday.com:

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