What's going on?

Data on Friday suggested that�some inflation (i.e. rising prices) might be coming back into the US economy. Prices were flat in January versus December (after having dropped from November to December).

What does this mean?

Yes, we�re aware that flat prices from month-to-month means zero inflation, but the important thing is that the trend seems to be reversing. Also, prices were 1.4% higher than they were one year ago (e.g. January 2015).

One of the main drivers of very low inflation has been the low oil price. But inflation is measured in relation to prices in the recent past (e.g. one year ago), so the effect of the huge collapse of the oil price will stop being reflected over the course of this year (unless the oil price is halved again, which seems unlikely). Excluding fuel and groceries, inflation was 0.3% versus December � which is actually quite a bit. If the price of gasoline stabilizes, America could actually see inflation pick up more quickly than some people think.

Why should I care?

For you personally: Rent and healthcare are the biggest drivers of inflation right now. If it feels like rent is getting more expensive, it�s because it is � so keep an eye out for a potential rent increase (if you�re a renter). Health insurance is almost 5% more expensive than a year ago (although the cost to you is often reduced by government subsidies) and the cost of actual medical care (like drug prices) has also increased.

The bigger picture: This news is a signal that the economy might not be doing as badly as some people fear. It�s usually pretty difficult for prices to rise if �demand� is falling precipitously: if consumers aren�t buying things, then prices often go down. That�s why a little bit of inflation is indicative of a healthy economy. So, this data is signalling that investors� fears about the US economy weakening a lot are, perhaps, overdone.