U.S. Inflation Rises 1.9% in 2018

The pace of U.S. inflation in 2018 slowed a bit from 2017, according to government figures released Friday, Jan. 11, 2019.

The easing was supported by an overall drop in consumer prices for December — their first slide in nine months — as gas and other energy items declined sharply and as American spent less for air fares, used cars and trucks, and motor vehicle insurance.

U.S. consumer prices fell 0.1% in December after being unchanged in November, the Labor Department said in its monthly report on the Consumer Price Index. The CPI is a broad measure of what Americans pay for everything from milk to medical care. The decline was the weakest and first since March.

In key pricing categories:

  • Prices at the pump sank 7.5% last month, the biggest decrease since February 2016, after falling 4.2% previously. Gasoline prices dropped 2.1% from December 2017. The broader index for energy, which combines items like gasoline, electricity and fuel oil, declined 3.5% in December after falling 2.2% in November. The Labor Department’s report shows energy prices slipped 0.3% year-over-year.

  • Overall food prices moved up 0.4% in December, the most since May 2014, after rising 0.2% previously. Food prices rose 1.6% over the last 12 months from 1.4%.

Excluding the more volatile food and energy components, so-called core consumer prices climbed 0.2% in December, matching their increase in October and November.

"Along with the index for shelter, the indexes for recreation, medical care, and household furnishings and operations all increased in December," the report noted.

Shelter or housing costs rose 0.3% for a second month in a row, keeping their year-over-year increase at 3.2%. Components of shelter include pricing items like rent for apartments, rental equivalence, lodging away from home such as hotels and motels, and housing at schools. The index accounts for about one-third of the entire CPI.

In the headline figure, U.S. inflation climbed 1.9% for the 12 months ending December from 2.2% previously and from 2.1% in 2017. The inflation rate was the lowest since August 2017. Inflation peaked in 2018 to 2.9% in both June and July, the highest levels since February 2012.

For a second straight time, core inflation rose 2.2% from a year earlier and ran quicker from 1.8% in 2017. July was the standout month in 2018 with its 2.4% increase, the highest core rate since September 2008. Until March, the 12-month rate had held at either 1.7% or 1.8% for 10 straight months. 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 its key interest rate.

"Overall, inflation risks remain well in check and are well down the list of potential concerns for both the capital markets and the economy," MarketWatch quoted Jim Baird, chief investment officer at Plante Moran Financial Advisors. "That bodes well for 2019 if the Fed can slow the pace of rate hikes or pause outright."

"The Fed will take this as further proof that price pressures are building more slowly than some have feared based on the strong growth of late and tight labor market," Reuters quoted James McCann, senior global economist at Aberdeen Standard Investments. "It certainly seems to justify the Fed’s message about being more patient on rate increases."

The following table of key inflation figures is for the last nine months through November, as published by the U.S. Labor Department’s Bureau of Labor Statistics (www.bls.gov/cpi) on January 11, 2018. 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 to December 2018 Consumer Prices – Gains & Losses in Percent

  June 2018 July 2018 Aug 2018 Sept 2018 Oct 2018 Nov 2018 Dec 2018 12 Month
All items 0.1 0.2 0.2 0.1 0.3 .0 -0.1 1.9
  Food 0.2 0.1 0.1 .0 -0.1 0.2 0.4 1.6
    Food at home 0.2 0.2 .0 -0.1 -0.2 0.2 0.3 0.6
    Food away from home 0.2 0.1 0.2 0.2 0.1 0.3 0.4 2.8
  Energy -0.3 -0.5 1.9 -0.5 2.4 -2.2 -3.5 -0.3
    Energy commodities 0.6 -0.6 3.0 -0.2 2.9 -4.1 -7.4 -1.8
      Gasoline (all types) 0.5 -0.6 3.0 -0.2 3.0 -4.2 -7.5 -2.1
      Fuel oil 2.9 1.2 2.2 0.3 3.7 -2.9 -11.4 1.9
    Energy services -1.5 -0.4 0.4 -0.8 1.7 0.4 1.8 1.4
      Electricity -1.4 -0.4 0.3 -0.5 2.3 0.3 0.7 1.1
      Utility (piped) gas service -1.7 -0.5 0.9 -1.7 -0.6 0.7 5.6 2.3
  All items less food, energy 0.2 0.2 0.1 0.1 0.2 0.2 0.2 2.2
    Commodities less food, energy .0 0.1 -0.3 -0.3 0.3 0.2 0.1 0.1
      New vehicles 0.4 0.3 .0 -0.1 -0.2 .0 .0 -0.3
      Used cars and trucks 0.7 1.3 0.4 -3.0 2.6 2.4 -0.2 1.4
      Apparel -0.9 -0.3 -1.6 0.9 0.1 -0.9 .0 -0.1
      Medical care 0.2 -1.1 -0.3 -0.1 -0.1 0.4 -0.2 -0.5
    Services less energy 0.2 0.3 0.2 0.2 0.2 0.2 0.3 2.9
      Shelter 0.1 0.3 0.3 0.2 0.2 0.3 0.3 3.2
      Transportation 0.2 0.5 0.3 0.5 0.1 -0.3 -0.2 2.8
      Medical care 0.5 0.1 -0.2 0.2 0.2 0.4 0.4 2.6

 

The BLS tends to release inflation data around the middle of a month based on consumer prices surveyed in the previous month. The Consumer Price Index (CPI) for December and the latest annual period become public on February 13, 2019.

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

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