Americans paid extra for nearly everything last month as the cost of living picked up more than expected, newly released US inflation data from the government shows.
Consumer prices advanced 0.5 percent in December 2010, capping six straight monthly gains. Many forecasters were pegging an inflation rate that hovered closer around 0.4 percent. Consumer prices were up 0.1 percent in November, but back then energy prices were in check as they had risen by the smallest amount in five months.
Most items the government tracks actually ticked only modesty higher in December 2010, but not energy. Prices at the pump soared. Gasoline jumped 8.5 percent in December 2010 versus a 0.7 percent increase during the previous month.
"The gasoline index rose sharply and accounted for about 80 percent of the all items seasonally adjusted increase," the US Labor Department reported Friday morning in its monthly Consumer Price Index (CPI) statement.
Food costs edged slightly higher, climbing 0.1 percent last month. That was lower than the previous monthly 0.2 percent gain.
Stripping out the more volatile food and energy items, the so-called core US inflation rate advanced 0.1 percent in December 2010, the same as in November.
"The index for all items less food and energy also rose in December. An increase in the shelter index accounted for about 60 percent of the rise, and the indexes for airline fares, medical care and apparel rose as well," noted the Labor Department’s report. "These increases more than offset declines in the indexes for communication, recreation, and household furnishings and operations."
The Federal Reserve noted on Wednesday that companies are having to pay more to produce goods and services, but that "competitive pressures" were limiting how those costs were getting passed down to the consumer level.
US Inflation climbed 1.5 percent year. That is higher than the 1.1 percent 12-month reading reported in November. US inflation was at 2.7 percent in 2009.
"It is disconcerting that inflation is starting to accelerate, and you have to wonder, with gas prices moving above $3 a gallon, whether the rate of inflation will continue to escalate," Bernard Baumohl, chief global economist with The Economic Outlook Group, said and was quoted on CNNMoney.com.
The core US inflation rate rose 0.8 percent on an annual basis, which was the same reading as in the previous month and still close to the 0.6 percent rise in October which was the lowest 12-month increase since record-keeping began in 1957. However, as 2010 is now closed, the 0.8 percent reading marks a new record low for a year. Core US inflation was up 1.8 percent in the prior year. The latest level continues to remain well below the Federal Reserve’s target range of 1-2 percent, as noted in the Fed’s monthly FOMC statement last month:
"Longer-term inflation expectations have remained stable, but measures of underlying inflation have continued to trend downward," said the Federal Open Market Committee (FOMC).
"The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period," the FOMC added.
"The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate."
The FOMC’s next two-day meeting, with its economic policy statement and views on inflation to follow at the conclusion, is scheduled for January 25-26.
Consumer prices as reported by the US Labor Department follow:
December 2010 Consumer Prices – Gains (%)
|Food at home||-0.1||-0.1||.0||0.3||.0||0.3||0.1||1.7|
|Food away from home||0.1||.0||0.3||0.3||0.1||0.1||0.1||1.3|
|Gasoline (all types)||-4.5||4.6||3.9||1.6||4.6||0.7||8.5||13.8|
|Utility (piped) gas service||0.6||1.7||1.1||-2.3||-0.4||-5.7||1.4||-2.8|
|All items less food, energy||0.2||0.1||.0||.0||.0||0.1||0.1||0.8|
|Comm. less food, energy||0.2||0.2||0.1||-0.2||-0.2||-0.1||.0||-0.4|
|Used cars and trucks||0.9||0.8||0.7||-0.7||-0.9||-0.5||-0.1||3.7|
|Services less energy||0.1||0.1||.0||0.1||0.1||0.2||0.1||1.3|
The Labor Department’s Consumer Price Index for January 2011 is scheduled for release on February 17, 2011, at 8:30 a.m. (ET). The CPI data is used as the core engine for the US Inflation Calculator.