HomeInflationU.S. Inflation Reaches Nine-Month High in December, Driven by Energy

U.S. Inflation Reaches Nine-Month High in December, Driven by Energy

U.S. consumer prices posted their largest increase in nine months in December, slightly surpassing economists’ expectations. Meanwhile, underlying inflation pressures, though still elevated, came in softer than anticipated.

Gasoline prices were a major contributor to overall inflation, bolstered by continued increases in items like shelter costs and food prices.

Energy prices hikes accounted "for over forty percent of the monthly all items increase," the Labor Department’s monthly inflation report noted.

The headline inflation figure reveals a 0.4% rise in U.S. consumer prices for December, the largest increase since March, following a 0.3% uptick in November, according to the Labor Department’s January 15 Consumer Price Index (CPI) report.

The Consumer Price Index (CPI), a key inflation gauge, tracks what American consumers pay for a wide range of everyday goods and services, from eggs to energy. The widely reported consensus was for a 0.3% monthly increase.

Food prices overall increased by 0.3% in December, following a 0.4% rise in November. Grocery store prices climbed 0.3%, slowing from November’s 0.5% increase, while dining-out expenses grew 0.3% for the second straight month.

On an annual basis, food prices rose 2.5%, slightly higher than November’s 2.4% increase. Grocery prices advanced 1.8%, up from the prior 1.6% rise, and dining-out costs climbed 3.6% for the second consecutive month.

In other sectors, gasoline prices surged 4.4% in December, accelerating from a 0.6% increase in November. Year-over-year, gas prices dropped 3.4%, narrowing from the prior 8.1% decline.

The broader energy index, which includes items like gasoline, electricity, and fuel oil, rose 2.6% in December following a modest 0.2% gain in November. Year-over-year, energy prices dipped 0.5%, easing from the previous 3.2% decline.

Excluding volatile food and energy components, the rate of core consumer prices rose by 0.2% in December, slowing from four straight 0.3% increases and coming in a tenth lower than expected.

Shelter or housing prices increased by 0.3% for a second month, marking their 56th consecutive monthly rise. Year-over-year, they increased by 4.6%, down from a 4.7% rise.

Other recent 12-month comparisons show gains of 4.9% in both October and September, 5.2% in August, 5.1% in July, 5.2% in June, 5.4% in May, 5.5% in April, 5.7% in both March and February, 6% in January, 6.2% in December 2023, 6.5% in November 2023, 6.7% in October 2023, 7.2% in September 2023, 7.3% in August 2023, 7.7% in July 2023, 7.8% in June 2023, 8% in May 2023, 8.1% in April 2023, and 8.2% in March 2023, the latter being the most significant annual increase since June 1982.

The shelter component of the CPI includes prices for items such as apartment rents, owners’ equivalent rent – a measure of what homeowners would pay to rent or earn from renting their property – lodging away from home like hotels and motels, and housing at schools. This index makes up roughly one-third of the total CPI.

In other key pricing categories:

  • Clothing prices rose 0.1% in December after a 0.2% increase in November and were up 1.2% from a year earlier.
  • New vehicle prices increased 0.5% in December following a 0.6% rise in November but fell 0.4% year-over-year.
  • Used car and truck prices climbed 1.2% during the month, building on a 2% gain in November, but declined 3.3% compared to the previous year.
  • Airline fares jumped 3.9% in December after a 0.4% uptick in November and soared 7.9% year-over-year.

In terms of the headline annual rate, inflation rose 2.9% for the 12 months ending in December, marking the largest increase since July and aligning with forecasts. This compares to the previous 2.7% rise.

"When you step back and look at the overall state of inflation, we’re not really going anywhere," Sarah House, senior economist at Wells Fargo, told The New York Times. "While there has been progress, the pace has been really disappointing."

For a broader perspective and a look further back, the inflation rate peaked at 9.1% during the 12-month period ending in June 2022. This was the fastest rate of inflation since November 1981. Additionally, until March 2023, inflation rates had remained at or above 6% for 17 consecutive months.

Meanwhile, core inflation rose by 3.2% in the year through December, a tenth below expectations, after three consecutive 3.3% increases. This core, "all items less food and energy" index, is one of the benchmark inflation rates monitored by the Federal Open Market Committee (FOMC) to guide the central bank in setting its key interest rate.

In September 2022, the annual core inflation rate at 6.6% was the highest since August 1982. Many economists consider the core reading as a better predictor for future inflation.

The following table of key 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) on January 15, 2025. To index the data each month, the BLS monitors the prices of about 80,000 consumer goods and services from around the nation. All monthly and annual pricing changes are in percentages.

June 2024 to December 2024 Consumer Prices – Gains & Losses in Percent
(Seasonally Adjusted from Prior Month and Unadjusted 12-Month)

  June 2024 July 2024 Aug 2024 Sept 2024 Oct 2024 Nov 2024 Dec 2024 12 Month
All items -0.1 0.2 0.2 0.2 0.2 0.3 0.4 2.9
  Food 0.2 0.2 0.1 0.4 0.2 0.4 0.3 2.5
    Food at home 0.1 0.1 0.0 0.4 0.1 0.5 0.3 1.8
    Food away from home 0.4 0.2 0.3 0.3 0.2 0.3 0.3 3.6
  Energy -2.0 0.0 -0.8 -1.9 0.0 0.2 2.6 -0.5
    Energy commodities -3.7 0.1 -0.6 -4.0 -1.0 0.5 4.3 -3.9
      Gasoline (all types) -3.8 0.0 -0.6 -4.1 -0.9 0.6 4.4 -3.4
      Fuel oil -2.4 0.9 -1.9 -6.0 -4.6 0.6 4.4 -13.1
    Energy services -0.1 -0.1 -0.9 0.7 1.0 -0.1 0.8 3.3
      Electricity -0.7 0.1 -0.7 0.7 1.2 -0.4 0.3 2.8
      Utility (piped) gas service 2.4 -0.7 -1.9 0.7 0.3 1.0 2.4 4.9
  All items less food, energy 0.1 0.2 0.3 0.3 0.3 0.3 0.2 3.2
    Commodities less food, energy -0.1 -0.3 -0.2 0.2 0.0 0.3 0.1 -0.5
      New vehicles -0.2 -0.2 0.0 0.2 0.0 0.6 0.5 -0.4
      Used cars and trucks -1.5 -2.3 -1.0 0.3 2.7 2.0 1.2 -3.3
      Apparel 0.1 -0.4 0.3 1.1 -1.5 0.2 0.1 1.2
      Medical care 0.2 0.2 -0.2 -0.7 -0.2 -0.1 0.0 0.5
    Services less energy 0.1 0.3 0.4 0.4 0.3 0.3 0.3 4.4
      Shelter 0.2 0.4 0.5 0.2 0.4 0.3 0.3 4.6
      Transportation -0.5 0.4 0.9 1.4 0.4 0.0 0.5 7.3
      Medical care 0.2 -0.3 -0.1 0.7 0.4 0.4 0.2 3.4

 

The BLS releases inflation data around the middle of the month, covering consumer prices surveyed up to the previous month. The Consumer Price Index (CPI) for January and the latest annual period will be made public on February 12, 2025.

The CPI data is also used to calculate inflation rates and power this site’s U.S. Inflation Calculator, which displays the cumulative inflation and the change in the buying power of the U.S. dollar over time.

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