Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

U.S. Core Consumer-Price Gauge Increases by Less Than Forecast

Published 2020-01-14, 08:30 a/m
Updated 2020-01-14, 08:45 a/m
© Reuters.  U.S. Core Consumer-Price Gauge Increases by Less Than Forecast

© Reuters. U.S. Core Consumer-Price Gauge Increases by Less Than Forecast

(Bloomberg) -- A gauge of underlying U.S. inflation rose less than forecast in December, restrained in part by a deceleration in shelter costs and underscoring the Federal Reserve’s view that price pressures are muted.

The core consumer price index, which excludes volatile food and energy costs, increased 0.1% in December from the prior month, the smallest advance in three months, a Labor Department report showed Tuesday. The median estimate in a Bloomberg survey of economists called for a 0.2% rise. Compared with a year earlier, the core CPI rose 2.3%, in line with estimates. The broader CPI increased 0.2% and 2.3% from December 2018, both below forecast.

The subdued gain in costs of household goods and services indicates Fed policy makers can hold the line on interest rates for much, if not all, of this year. Fed officials reduced the target range for their benchmark rate three times in 2019 and signaled they will remain on hold for the near future or until the economic outlook shows a material change.

The Labor Department’s CPI tends to run higher than the Commerce Department’s personal consumption expenditures price index, which the Fed officially targets. The core PCE index that policy makers watch for a better read on underlying price trends softened in November, rising 1.6% from the same month in 2018. Core PCE has held below the 2% objective for the better part of seven years.

While inflation remains relatively contained, the 2.3% full-year increase in the core CPI gauge was the fastest for a calendar year since 2.4% in 2007.

The Labor Department’s CPI report showed shelter costs, which make up about a third of total CPI, decelerated. They rose 0.2% after a 0.3% gain in November, and were up 3.2% year-over-year for the smallest advance since January last year. Both owners-equivalent rent, one of the categories that tracks rental prices, and rent of primary residence climbed 0.2% from a month earlier.

The CPI was also restrained by a 0.8% monthly decline in used car and truck prices. They were down 0.7% from a year earlier, the biggest year-over-year drop since September 2018.

Prices of household furnishings and operations decreased 0.4% in December, the largest monthly decline in five years. Airfares also fell for a third straight month.

Energy prices rose 1.4% from the prior month as gasoline prices climbed 2.8%. Food costs increased 0.2%, and expenses for medical care were up 0.6%.

Apparel prices, which tend to be volatile on a month-to-month basis, rose 0.4%, the most in five months.

The report showed new vehicle prices increased for the first time since June.

A separate Labor Department report Tuesday showed average hourly earnings, adjusted for price changes, rose 0.6% in December from a year earlier after 1.1% the previous month. The monthly jobs report last week had already showed an unexpected deceleration in nominal wages.

Economists surveyed by Bloomberg forecast the core CPI to rise 0.2% from the prior month and 2.3% from a year earlier, with the broader index seen rising 0.3% and 2.4% on a year-over-year basis.

©2020 Bloomberg L.P.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.