Consumers shop in Rosemead, California, on December 12, 2023.
Frederick J. Brown AFP | Getty Images
the Consumer price index Employment rose 3.4% last month from a year earlier, the U.S. Labor Department reported Thursday. This is a larger increase than the 3.1% in November and 3.2% in October.
The index has fallen by half since December 2022 – when inflation was 6.5% – and is down significantly from its pandemic-era peak of 9.1% in June 2022.
Consumers' purchasing power has also increased over the past year: Hourly wages after accounting for inflation – so-called “real earnings” – rose 0.8% from December 2022 to December 2023. According to To the Ministry of Labor.
The Consumer Price Index, a key measure of inflation, measures how quickly the prices of everything from fruits and vegetables to haircuts and concert tickets change throughout the U.S. economy.
Economists said lower energy prices helped pull down the overall index in recent months but did not provide much relief to consumers in December.
Moreover, economists said so-called “base effects” made the latest annual CPI reading look somewhat inflated. This term refers to how fluctuations in the monthly inflation rate affect the size of the annual change.
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Essentially, there was an “extraordinarily small” (0.1%) monthly increase in prices from November 2022 to December 2022, said Andrew Hunter, deputy chief US economist at Capital Economics. Meanwhile, the CPI rose 0.3%. From November 2023 to December 2023 – this difference was enough to increase the year-on-year comparison.
For this reason, the monthly figures often provide a more accurate measure of inflation trends than the annual reading – Hunter said, and the monthly indicators are still “moving in the right direction.”
Shelter prices rose 6.2% over the past year. As the largest portion of the average household budget, shelter has accounted for more than two-thirds of the increase in the CPI since December 2022, according to the Labor Department.
Other categories that saw “significant” increases during that period include auto insurance (whose prices jumped 20.3%); Entertainment, such as admission to concerts and sporting events (2.7%); personal care, such as haircuts (5%); Education costs, such as tuition and day care (2.4%), the Labor Department said.
Meanwhile, prices have stabilized – or even fallen – in some categories. The trend occurred largely in physical goods such as new and used cars, home furnishings, entertainment goods (such as toys, televisions, and musical instruments), and education and communications goods (such as computers and college textbooks), economists said.
For example, prices for used cars and trucks are down 1.3% since December 2022. Home appliance prices are down 4%, while prices for dishes and cutlery are down 2%, and prices for suits, sport coats and men's outerwear are down 6%.
This easing is generally due to “eliminating pandemic-era supply shortages,” Hunter said. Supply chain bottlenecks and rising consumer demand have fueled these shortages.
Meanwhile, seasonally adjusted gasoline prices rose by 0.2% from November to December, while they fell by 6% and 5% in November and October, respectively. They are down 1.9% over the year.
Food inflation also eased, with grocery prices rising 1.3% year-on-year in December compared to 1.7% in November. There are signs that consumers are doing more bargain hunting at grocery stores, which in turn have become somewhat more price competitive to attract consumers, House said.
While housing inflation has been stubbornly high, it is expected to decline in the coming months because market rents have been flat to low, said Mark Zandi, chief economist at Moody's Analytics. It takes time for these dynamics to factor into the Labor Department's CPI calculations, he said.
“What's important for most Americans is the cost of basic staples — the cost of a gallon of regular unleaded gasoline, food and rent — and those things are moving in the right direction,” Zandi said.
While food and housing prices are “still very high” compared to two or three years ago, consumers “take some solace that they are no longer rising,” he said.
