US Inflation Climbs 2.1% in 2016; Quickest Annual Rate Since 2011

United States inflation over the full year of 2016 ran at the fastest pace in five years, propelled by five straight months of cost of living increases, according to government figures released Wednesday, January 18.

Pricing gains were broad-based, but led again by rising shelter and gasoline.

Looking at the headline monthly figure, consumer prices rose 0.3% in December, following a 0.2% increase in November, the Labor Department said in its monthly report on the Consumer Price Index. The CPI measures what Americans pay for everything from transportation to tobacco.

In key categories:

  • Gasoline prices jumped 3% last month after rising 2.7% in November. In 2016, prices at the pump surged 9.1%. The broader index for energy, which combines items like gasoline, electricity and fuel oil, rose 1.5% after moving up 1.2% previously. Energy prices advanced 5.4% on the year.

  • Food prices were flat for a sixth month in a row. And yet again, a decline in food at home prices offset an increase in the price for food away from home. For 2016, the cost of food fell 0.2%.

Stripping the more volatile food and energy categories, so-called core consumer prices climbed 0.2% in December after the same gain in November.

Within the major core grouping, shelter prices rose 0.3% for a second month in a row, jumping 3.6% for the year. Components of shelter include pricing items like rent, rental equivalence, lodging away from home, and housing at school.

"Along with the shelter index, the indexes for motor vehicle insurance (0.8%), medical care, education (0.5%), airline fares (1.9%), used cars and trucks (0.5% — the biggest increase since April 2015), and new vehicles (0.1%) were among the indexes that increased," the Labor Department’s report said.

Meanwhile, declining items included clothing (-0.7%) and communication (-0.1%).

In the headline annual figure, U.S. inflation jumped 2.1% in 2016 for the quickest rate of inflation for a full calendar year since gaining 3% in 2011. It last hit the 2.1% mark in the 12-month period ending June 2014. More recently, the reading rose 1.7% in the 12 months ended November. The level was as low as 0.8% in July.

Overall, the average inflation rate for 2016 was 1.3%. In 2015, inflation climbed 0.7% with an average running pace of 0.1%. Gasoline prices plunged that year.

In rounding out the Labor Department’s report, core U.S. inflation advanced 2.2% in 2016, from matching 2.1% increases in the 12 months ending November and in the full year of 2015.

"We expect an acceleration in wage growth and a large fiscal stimulus to push both headline and core [consumer-price] inflation up towards 3% this year," The Wall Street Journal quoted Andrew Hunter, U.S. economist with Capital Economics.

The core annual reading is one of the benchmark inflation rates monitored by the Federal Open Market Committee (FOMC) as it helps the central bank decide where to set the key interest rate.

"The overall narrative is, inflation is accelerating," Bloomberg News quoted Tom Simons, a senior economist at Jefferies LLC in New York. "We’re seeing broad-based, modest increases in prices. The Fed is going to be pleased" with these numbers.

Key areas climbing quickest in 2016 included medical care commodities and services (4.7% and 3.9%), shelter (3.6%), and transportation (2.8%). Two declining categories for the year included used cars and trucks (-3.5%) and clothing (-0.1%).

The following table of major inflation figures is for the last seven months through December, as published by the U.S. Labor Department’s Bureau of Labor Statistics (www.bls.gov/cpi). To index the data each month, the BLS monitors the prices of about 80,000 consumer goods and services from around the nation. The monthly and annual pricing changes listed below are in percentages.

June to December 2016 Consumer Prices – Gains & Losses in Percent

  June 2016 July 2016 Aug 2016 Sept 2016 Oct 2016 Nov 2016 Dec 2016 12 Month
All items 0.2 .0 0.2 0.3 0.4 0.2 0.3 2.1
  Food -0.1 .0 .0 .0 .0 .0 .0 -0.2
    Food at home -0.3 -0.2 -0.2 -0.1 -0.2 -0.1 -0.2 -2.0
    Food away from home 0.2 0.2 0.2 0.2 0.1 0.1 0.2 2.3
  Energy 1.3 -1.6 .0 2.9 3.5 1.2 1.5 5.4
    Energy commodities 3.3 -4.4 -0.9 5.5 6.7 2.5 3.0 9.0
      Gasoline (all types) 3.3 -4.7 -0.9 5.8 7.0 2.7 3.0 9.1
      Fuel oil 3.3 -1.3 -2.5 2.4 5.9 -1.2 6.0 12.7
    Energy services -0.5 1.0 0.8 0.7 0.5 -0.1 -0.1 2.2
      Electricity -0.5 0.5 0.5 0.7 0.4 .0 .0 0.7
      Utility (piped) gas service -0.4 3.1 2.1 0.8 0.9 -0.4 -0.4 7.8
  All items less food, energy 0.2 0.1 0.3 0.1 0.1 0.2 0.2 2.2
    Commodities less food, energy -0.3 -0.1 0.1 -0.1 0.1 -0.3 .0 -0.6
      New vehicles -0.2 0.2 .0 -0.1 0.2 -0.1 0.1 0.3
      Used cars and trucks -1.1 -1.0 -0.6 -0.3 -0.1 0.3 0.5 -3.5
      Apparel -0.4 .0 0.2 -0.7 0.3 -0.5 -0.7 -0.1
      Medical care 0.8 0.5 1.4 0.6 0.1 -0.5 0.4 4.7
    Services less energy 0.3 0.2 0.3 0.2 0.2 0.3 0.3 3.1
      Shelter 0.3 0.2 0.3 0.4 0.4 0.3 0.3 3.6
      Transportation 0.3 -0.2 0.1 .0 -0.2 0.4 0.6 2.8
      Medical care 0.2 0.5 1.0 .0 .0 0.2 0.1 3.9

 

The BLS publishes inflation data around the middle of a month based on consumer prices surveyed through to the previous month. The Consumer Price Index (CPI) for January and over the latest 12-month or annual period becomes public on February 15, 2017.

CPI data is used in calculating inflation rates and in this site’s calculator for inflation. The US Inflation Calculator shows accumulated inflation and the change in buying power of the U.S. dollar over time.

One thought on “US Inflation Climbs 2.1% in 2016; Quickest Annual Rate Since 2011”

Leave a Reply