Consumers await key inflation data as hopes for 'soft landing' linger

Elevated inflation continues to pervade the U.S. economy.

And while the pace of 12-month price increases has slowed from the near-double-digit highs reached in the summer of 2022, American consumers are still encountering higher prices compared with before the pandemic.

With a few exceptions, economists agree that the higher prices are most likely here to stay. Now, the question is how quickly price growth for consumer goods and services will continue to slow.

On Tuesday, the Bureau of Labor Statistics will release the consumer price index for January. Estimates are for a 12-month increase of 2.9%, down from 3.4% in December. Excluding food and gas, expectations are for a reading of 3.7%, little changed from 3.9%.

If the annual CPI reading lands at or below the 2.9% forecast, it would be the first time inflation has drifted back into the 2% range since March 2021.

In other words, price growth will most likely have continued to decline in January, adding further evidence that an economic "soft landing" is unfolding.

High price tolerance

Still, consumers appear to be adjusting to a new normal of higher prices. NBC News recently covered how the cost of fast food — traditionally seen as a refuge from high-priced dining — has surged in the post-pandemic period.

“Eating at home has become more affordable,” McDonald's CEO Chris Kempczinski said in a call with analysts last week, noting consumers making $45,000 or less per year were showing particular price sensitivity. “The battleground is certainly with that low-income consumer.”

After a massive surge amid the outbreak of the war in Ukraine, price growth for food at home has slowed dramatically — to just 1.3% on a 12-month basis in December.

By comparison, the price of food