With inflation coming in a touch hotter than expected in January's Consumer Price Index (CPI) print, Yahoo Finance's Dani Romero, Brooke DiPalma, and Pras Subramanian break down pricing in key areas like shelter, food, and autos.

Shelter costs rose 6% year-over-year, in line with forecasts on strong rental demand. On the food front, restaurant prices surpassed groceries, up 5.2% versus 1.2% for groceries. Lastly, the auto sector continues to experience a slowdown, where new vehicle prices rose 0.7% annually. Although, January is seasonally slow for the sector.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Angel Smith

Video Transcript

RACHELLE AKUFFO: Now, we've got team coverage to break down today's inflation data with Yahoo Finance's Dani Romero, Brooke DiPalma, and Pras Subramanian. So, Dani, let's start with you. What did you see from Shelter.

DANI ROMERO: The Shelter component of CPI did not disappoint. On a yearly basis, Shelter came in at 6%. This was expected by some economists as there continues to be really strong rental demand. Now, on a monthly basis, Shelter gained 0.6%. Remember, the Shelter index makes up about a third of the CPI basket.

And there are two components that really hold the biggest weight in the Shelter index, and that's owners equivalent rent, which is OER, the hypothetical rent that you would earn if you rent out your property, and then rent, which really lags real time rent data. So OER continued to stay in the range of 0.4% to 0.6% per month since last March. And on last month, OER rose 0.6% on a monthly month basis.

Now, while rent prices logged in another 0.4% gain, what does this all mean? This is reassurance that rents are coming down as expected, not resulting in more price pressures, and really not to worry so far, so now. But there still remains to be really strong rent demand.

Now we're going to have to turn to Brooke DiPalma that will give us the breakdown on food prices. Brooke, what are you seeing?

BROOKE DIPALMA: Good morning, Dani. Thanks so much.

The cost of food here continues to outpace restaurants and bars, is rising faster than the cost of groceries, and that's what I'm watching in particular. The cost of food to dine out is up roughly 5.1%, whereas the cost of groceries is up just 1.2%. And this widening gap is something that I continue to watch.

But important to note here that the cost of groceries did see a slight uptick, due to some sticky inflation that we're seeing. Frozen non-carbonated juices and drinks spiked 29.9%, year over year. That's due to price hikes taken by major companies, in addition to that cost of ongoing sticky inflation among sugar prices.

Sugar and sugar substitutes, those jumped 7.2% year over year, and that's largely due to the El Nino weather pattern that we're seeing that's negatively impacting sugar crop production. That's something economists continue to see throughout the beginning of 2024, and they expect to continue throughout this year. We're also seeing beef and veal, that lower cattle supply, really increasing costs there, up 7.7% year over year.

But once again, cost of food at restaurants, the cost to dine out is rising faster than the cost of groceries, and we're already seeing that impact. And that's largely due to the fact that when this sort of uptick happens, you'll see consumers pull back a bit, they'll cook more at home, and this is particularly impacting the lower income consumer. We already heard shout outs on recent earnings calls, McDonald's CEO calling it a battleground for low-income consumers. They did note that they're seeing some transaction size reduction and some trade down among this particular demographic. And Starbucks, they don't really have-- they have a higher income demographic typically, but they did note that occasional customer is pulling back, and that's largely because it costs more to dine out, so consumers are saying, hey, I'll make that coffee at home.

Pras Subramanian, I know you're weighing in on autos. What are you seeing there?

PRAS SUBRAMANIAN: Hey, Brooke. Yeah, continued moderation, even deflation in parts of the auto market. In January, new vehicle prices were flat for the month and only up 7/10 of 1% year over year, and the used market prices were down 3.4% and down 3 and 1/2 percent year over year. This continues to trend, we saw, in December and the back half of 2023, where prices were moderating and returning back to normal.

Now, January is typically a slow month for auto sales. So a bigger test for inflation in the auto sector will be during the spring buying season in the months ahead. Brad, back to you.

BRAD SMITH: All right, thanks so much, Pras. Much to really break down and continue to monitor how the futures are looking at this. Of course, some slippage across the board for the Dow, the NASDAQ, and the S&P 500.