United States: Inflation strengthens to over one-year high in December
January 14, 2020
Consumer prices rose 0.2% month-on-month in December, a notch down from the 0.3% increase in November and missing market expectations of a 0.3% increase. Falling prices for used cars and trucks and transportation services, and softer price gains for shelter weighed on the reading. On the other hand, energy prices rose sharply in December amid higher gasoline prices, while medical care services recorded another strong increase. Core consumer prices—which exclude volatile items such as food and energy—ticked down to 0.1% in December from 0.2% in November.
Inflation climbed to 2.3% in December from 2.1% in November, reaching an over one-year high and matching market expectations. Meanwhile, core inflation was stable at 2.3%. However, the core PCE price index—an indicator closely followed by the Fed—edged down to 1.6% in November, the latest month for which data is available, continuing to track below the Fed’s 2.0% target.
All told, average inflation clocked in at 1.8% in 2019, down from 2.4% in 2018.
Commenting on the 2020 inflation outlook, Shernette McLeod, economist at TD Economics stated:
“Given recent news of a phase-one trade deal with China, which would result in a lowering of tariff rates, the impetus for price increases may be further abated. All this points to moderating inflation heading into 2020.”
Author: Lindsey Ice, Economist