U.S. Consumer Price Index

U.S. Consumer Prices Rise for Fourth Consecutive Month

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The U.S. Consumer Price Index, including food and energy (see graph above), increased to 0.7% in December. Core inflation is at 2.1%.

In the surest sign in months that inflation is on the rise, U.S. consumer prices including food and energy increased for the fourth consecutive month to 0.7%. 

U.S. consumer prices, as measured by the Consumer Price Index (CPI), rose to 0.7% in December 2015 on a seasonally adjusted basis from a year earlier, according to data released yesterday by the U.S. Department of Labor.  On a monthly basis, the CPI declined 0.1% in December from the November level of 0.00.

Core inflation, which is the CPI exclusive of the more volatile food and energy items, rose to 2.1% for its second consecutive monthly increase.  Core inflation is often tracked more closely by economists and the Federal Reserve because it represents a much broader basket of consumer items without the often volatile influence of food and energy prices.

That the CPI has risen at all, much less for four consecutive months, is remarkable when considering that oil and gas prices have plunged to their lowest levels in 13 years.  The rise in both the overall CPI and core CPI is a clear indication that inflation could finally be arriving on the scene after eight years of Fed stimulus and near-zero interest rates.

Increases in motor vehicle insurance, which rose 5.7%; hospital services, which rose 4.2%; tobacco and smoking products, which rose 3.6%; and housing and rental prices, which rose 3.2%, were the main drivers of the core CPI figure of 2.1%.  Meanwhile, prices declined for apparel, airline fares, personal care, new vehicles and communication, according to the U.S. Bureau of Labor Statistics. 

In addition to consumer prices, wages, long a principal driver of inflation, are starting to increase, according to earnings data also released yesterday from the Labor Department.  Real average hourly earnings increased 1.8% in December 2015, on a seasonally adjusted basis, from the December 2014 level. 

What's more, median weekly earnings of wage and salary workers rose 3.3% higher than a year earlier.