Energy and food prices drove inflation in December
Inflation rose in December to its highest level since July with much of the increase driven by increasing energy and food prices.
The Labor Department released the consumer price index (CPI) – a broad measure of how much everyday goods like gasoline, groceries and rent cost – for December, which showed that prices were 2.9% higher than a year ago following a 0.4% increase from the prior month, which was larger than what LSEG economists estimated.
Much of the increase in prices was due to higher energy and food costs that are straining household budgets.
Over 40% of the monthly CPI increase was attributed to rising energy prices, as the Bureau of Labor Statistics' energy index increased 2.6% in December after energy prices had shown little change in the preceding months and were down 0.5% on an annual basis last month.
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Energy prices were flat in July, then posted declines of 0.8% and 1.9% in August and September, respectively, before flattening out in October. They rose by 0.2% in November before the larger 2.6% uptick in December.
Gas prices were a significant contributor to the rise in the energy index, as they increased 4.4% in December. Similar to the broader energy index, gas prices had declined by 0.6% in August, 4.1% in September and 0.9% in October before rising at the end of the year with a gain of 0.6% in November, ahead of the larger increase last month.
The price of utility gas service also rose in December, increasing by 2.4% from the prior month and up 4.9% on an annual basis.
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Food prices also posted a notable increase in December, rising 0.3% for the month. Unlike the trend with energy prices, food costs have posted similar modest increases in recent months.
Dating back to June, the smallest monthly increases in food prices were 0.1% in June, July and 0.2% in October. Larger upticks were recorded of 0.4% in September and November in the lead-up to the December CPI report.
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Within the BLS' food price index, the cost of food away from home has increased by twice as much as food at home over the past year, with the former rising by 3.6% in the last 12 months compared to 1.8% for the latter.
Eggs continued to experience significant price volatility among food items tracked by the BLS, rising 3.2% in December to push the 12-month rise to 36.8%. Egg supplies have been disrupted by an avian flu outbreak over the past year.
The U.S. Department of Agriculture noted in a report this month, "Supply remains the greatest challenge in the marketplace as highly pathogenic avian influenza (HPAI) continues to impact commercial table egg layer flocks into the new year."
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Beef prices also saw prices rise at a faster clip than overall food prices in December, both on an annual and monthly basis. Beef and veal prices increased 0.5% in December from the prior month and are up 4.9% from a year ago.