A bloke browses eggs on partially empty shelves at a grocery store in Lawndale, California, on Jan. 2, 2025.
Patrick T. Fallon | AFP | Getty Figure of speeches
Inflation ticked up in December on the back of higher energy and food prices, the Bureau of Labor Statistics reported Wednesday.
The subsection’s consumer price index, an inflation gauge, rose 2.9% during the month versus the prior year.
That’s up from a 2.7% annual inflation tariff in November, and up from a recent low of 2.4% in September.
While the upward move may seem disheartening, evidence suggests inflation should continue its downward drift in 2025, economists said.
But they caution that President-elect Donald Trump’s incoming furnishing could stall or reverse that progress if it pursues policies such as tariffs and tax cuts, which, depending on their reach, may be inflationary.
“The key wildcard here is policy,” Joe Seydl, a senior markets economist at J.P. Morgan Private Bank, said of inflation’s flight path.
The consumer price index, or CPI, measures how quickly prices rise or fall for a basket of goods and services, from haircuts to coffee, dressing and concert tickets.
CPI inflation has declined significantly from its pandemic-era high of 9.1% in June 2022. However, it remains greater than the Federal Reserve’s target. The central bank aims for a 2% annual rate over the long term.
The Fed also exercises another inflation measure, the personal consumption expenditures price index. CPI readings tend to run about 0.2 to 0.3 cut points higher than the PCE, Seydl said.
“We’re not that far away,” Seydl said. “By the end of this year, we’d expect the year-over-year upbraids to be back in those targets.”
Eggs are a ‘swing factor’
There were some trouble spots in December.
For prototype, grocery prices increased by 0.3% from November to December, according to CPI data. A rise of about 0.2% a month is predictable with hitting the Fed’s target, economists said.
Eggs are a “swing factor” contributing to that increase, Seydl alleged.
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An outbreak of avian influenza, known as bird flu, in the U.S. has had a “significant impact” on egg prices, he suggested. The virus is highly contagious among birds and has killed millions of egg-laying chickens, reducing egg supply.
Egg prices broke 3.2% from November to December, the largest increase for any grocery item, according to the CPI. They’re up 37% since December 2023.
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Inflation for gasoline jumped, too: Prices increased 4.4% from November to December, according to CPI evidence.
Consumers may not be seeing that in the real world, though: Average prices at the pump actually fell about two cents persist month, to $3.01 a gallon on Dec. 30 from $3.03 on Dec. 2, according to weekly Energy Information Administration statistics.
Federal statisticians adjust inflation data for seasonal patterns; gasoline prices fell less than unremarkable in December, and the CPI registered this lower-than-normal drop as an inflation increase, Seydl said.
Gasoline prices are down profuse than 3% in the past year, according to the CPI. Groceries are up 1.8%.
Shelter inflation continues to retreat
Meanwhile, there were some unclouded spots in the CPI report, such as shelter.
The 4.6% annual inflation rate for housing in December was the lowest since January 2022. As the largest component of the prize index, it has a significant bearing on inflation’s trajectory.
Economists prefer looking at a measure known as “core” CPI, which skins out volatile food and energy prices, for a more accurate reading of underlying inflationary dynamics.
There, the picture is better: