Shelter and services push prices up 3.4% from a year ago

by Kim Souza ([email protected]) 416 views 

Consumer prices tracked a bit higher than expected in December with overall prices up 3.4% from a year ago and 0.3% higher than the prior month, according to the Consumer Price Index (CPI) reported Thursday (Jan. 11) by the U.S. Bureau of Labor Statistics (BLS).

Economists had predicted an annual uptick of 3.2% with month-over-month prices up 0.2%. Core inflation that excludes volatile food and energy prices rose 0.3% for the month and 3.9% year over year. BLS said the annual reading hit its lowest level since May 2021.

Shelter (housing and rent) costs continued to escalate in December, rising 0.5% for the month, and also comprised over half of the CPI increase. BLS reports shelter costs rose 6.2% year over year as rents that typically lag other spending categories showed no sign of retreating.

Grocery prices inched 0.2% higher in December from the prior month and remained 2.7% higher than a year ago. Four of the six major grocery store food group indexes increased over the month. The index for meats, poultry, fish, and eggs rose 0.5% in December, led by an 8.9% increase in the index for eggs. Compared to a year ago, egg prices are down 23.8%, beef prices are up 8.7%, pork prices are flat overall and chicken prices were up 0.7% from a year ago.

Bakery food prices, such as bread, rolls, cake, cookies, etc., also rose 3.6% year over year, and they were down slightly from November. Cracker product prices are up 7.7% from a year ago, rising 0.1% from November. Dairy prices were up 0.3% from November but down 1.3% for the year. Fresh fruit and vegetable prices stabilized in December down fractionally from a year ago as well as the prior month. Canned or processed fruits and vegetable prices rose 2.7% from a year ago and ticked 0.5% higher from November.

Carbonized soda prices continued to rise in December up 3% from a year ago and 0.6% from November. Frozen non-carbonated juices and drink prices jumped 19.1% from a year ago and 1.4% from November. Sugar prices were up 5.2% year over year and 0.2% higher than November’s reading. Sugar substitute prices also remained elevated rising 6.9% from a year ago and up 1.1% for the month. Baby food and formula prices were up 7.3% from a year ago, but they were down 0.5% from November.

Restaurant prices overall rose 5.2% from a year ago and were 0.3% higher for the month. Price increases were higher year over year across the board up 4.5% at full-service establishments and up 5.9% at fast-food eateries. The prices were also fractionally elevated from the prior month.

Consumers enjoyed lower gasoline prices in December with the index down 1.9% from a year ago, but prices were up 0.2% from November. Propane prices fell 5% from December 2022 and were 0.4% lower than in November. Households did see higher electricity utility prices in December up 1.3% from the prior month and 3.3% more expensive than a year ago.

Airline fares increased 1% for the month, but they were down 9.4% from a year ago. Medical care prices rose by 0.7% for the month but were down fractionally from a year ago. Used car prices were down 1.3% year over year but ticked 0.5% higher from November. In other key price indexes, motor vehicle insurance bounced 1.5% higher from November and accelerated 20.3% from a year ago.

Overall, services excluding energy increased 0.4% for the month and 5.3% year over year, according to the BLS.

Sarah House, senior economist at Wells Fargo Securities, said the final CPI report of 2023 offered a few surprises.

“Core goods prices were unchanged in December, and on a year-over-year basis, inflation in this category is little different than its pre-COVID trend. Core services inflation, however, has remained somewhat stickier, with shelter prices easing only slowly and travel-related prices rebounding somewhat in December. We look for inflation to slow further over 2024 amid improved supply dynamics and more tepid demand from consumers. However, progress is likely to be slower-going this year and keep policymakers uneasy about how quickly inflation can return to 2% on a sustained basis,” House said.