U.S. consumer inflation is expected to rise to 7.2% in January, the highest in 30 years

The CPI, due at 8:30 a.m. ET Thursday , is expected to show growth of 0.4%, slower than the monthly increase in December, with the year-over-year forecast rising to 7.2%, the highest since 1982 and up from 7% in December.

Core inflation, which excludes food and energy, is expected to rise 0.4% in January, or 5.9% year-over-year, according to Dow Jones, compared with a monthly increase of 0.6% in December and a year-over-year increase of 5.5% in the final month of last year.

The U.S. January employment report showed that 467,000 new jobs were created in January, and the number of jobs in November and December was revised to 709,000.

Economists expect inflation’s hot annual pace to peak in March. The pandemic has made the path of inflation unique in many ways, especially since price increases had been tame until 2020.

Economists said the January CPI is likely to show early signs of a trend toward slower inflation for goods and faster increases in prices for services, including housing, that is expected to become more pronounced as 2022 unfolds.

Gapen said some of the price shocks from the pandemic have begun to fade. For example, he expects used car prices to rise 2.5% in January but then start to fall.

Supply chain issues should ease this year, which should directly impact the cost of goods. However, services inflation should remain at a 4% pace this year, above the pre-pandemic level of 3%, driven by demand and wage growth, Gapen said .

"Wages are skyrocketing," said Aditya Bhave , senior U.S. and global economist at Bank of America Corp. Wages rose 0.7% in December, or at an annual rate of 5.7%, according to the Bureau of Labor Statistics.

"Wage inflation should continue , hiring is very difficult and labour force participation remains low. It's a difficult problem to solve, " he said.

"Over the next few quarters, our hope is that as these idiosyncratic factors ease, price inflation will perhaps normalize a little bit. We'll get to a point where wages are growing faster than prices, and that's healthy for the economy," Bhave said.

Bhave said the rebound in clothing prices, home goods and furniture in January was likely to be less than what typically happens in that month.

He said this was due to year-over-year comparisons, as retailers did not offer as many holiday discounts due to supply issues during the pandemic . "The lack of those discounts means you get a smaller rebound than seasonality would suggest," Bhave added.

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