Thrifty Banker
  • Politics
  • Business
  • World
  • Investing
  • Politics
  • Business
  • World
  • Investing

Thrifty Banker

Business

Inflation ticked up to 3.4% in December thanks in part to outsized housing costs

by January 12, 2024
January 12, 2024
Inflation ticked up to 3.4% in December thanks in part to outsized housing costs

Inflation climbed from 3.1% to 3.4% in December, a sign the Federal Reserve will continue to have to wrestle consumer price growth down to its desired 2% level.

Forecasts had been for a reading of 3.2%.

On a monthly basis, inflation hit 0.3%, while core inflation, which strips away the more volatile costs of food and energy, was 3.9%, down from 4% in November but ahead of forecasts for a reading of 3.8%.

The biggest contributors to December’s pickup in price growth were housing and shelter costs, which the Bureau of Labor Statistics said accounted for more than half of the gain. On a year over year basis, total shelter costs increased 6.2%, while rents increased 6.5%.

‘As long as shelter inflation remains stubbornly elevated, the Fed will keep pushing back at the idea of imminent rate cuts,’ said Seema Shah, chief global strategist at Principal Asset Management, in a note to clients following the Thursday data release.

Yet economists also said these increases are unlikely to last given other real-time measures of housing costs showing cooling price growth. In its most recent rental report, the real estate group Redfin said the median asking rent in the U.S. fell for the third-straight month in December to $1,964.

The decline came as landlords grappled with rising vacancies due to a post-pandemic building boom, Redfin said. 

Indeed, there are signs consumers are starting to feel better about the economy — even though, to many of them, the prices they’re experiencing still don’t feel like a big improvement.

After two years of breakneck inflation that sent the cost of everyday goods and services surging, 2023 experienced a meaningful slowdown in price growth: the December 3.4% reading is down from the 6.4% growth seen in December 2022.

Thursday’s reading is still above the Federal Reserve’s inflation target of 2%, and prices in most cases aren’t actually reversing. As a result, the shell shock of the past 24 months for consumers is still wearing off.

“The good news is the rate of inflation has been steadily moderating and moving closer to the ultimate goal of 2%,” said Greg McBride, a vice president and the chief financial analyst at Bankrate. “The bad news is it doesn’t mean prices are actually falling — just that they’re not going up as fast.”

Two of the categories most affecting consumers — food at home and energy prices — have had more aggressive slowdowns in price growth than many other categories, McBride said. After hitting a high of 13.5% in August 2022, 12-month food price growth slowed to 1.3% in December, the BLS said Thursday.

And gas prices, which surged to almost $5 a gallon on average in June 2022, are now about $3 a gallon.

While Russia’s invasion of Ukraine produced an acute price surge for those two categories in 2021, McBride said their price growth has slowed thanks to a broader slowdown in economic growth — a trend that is likely to continue. The World Bank announced this week that it expects worldwide gross domestic product to hit just 2.4% this year, down from 2.6% in 2023, 3.0% in 2022 and 6.2% in 2021.

Yet, consumers still face everyday prices that are above pre-pandemic levels. White bread, which cost about $1.30 per pound in the winter of 2019-20, now costs about $2 per pound, according to BLS data. Ground beef has increased from about $3.87 a pound to $5.35 a pound over the same period. And a gallon of milk has climbed from roughly $3.20 to about $4.

So even as price growth continues to moderate, consumers are still adapting to a new normal.

“Consumer sentiment is still depressed overall,” said Matt Bush, the U.S. economist at Guggenheim Investments. “While the rate of inflation is slowing down, the absolute level is still really high — consumers are still unhappy with the level of prices.”

There are signs that consumer sentiment is slowly turning around now that wage growth has surpassed the rate of inflation.

Consumer confidence jumped in the final month of last year to its highest level since July. Data released Friday showed employers added 216,000 jobs in December, far more than expected, demonstrating the labor market remains robust even as it cools down.

Against that backdrop, some economists view even potentially concerning trends, like consumers’ ballooning debt burdens, as a sign that people are starting to feel a bit more optimistic as price pressures ease.

“They’re taking on additional debt because they expect to make more money,” said Joe Brusuelas, chief economist at the consulting firm RSM. Consumer debt figures don’t always paint a full picture, in part because wealthier Americans tend to borrow and repay more money at faster rates, he said. But even so, many consumers “have the capacity to pay that debt back” despite higher interest rates on credit cards to mortgages and auto loans.

“In many ways, it’s an expression of confidence,” he added.

Mark Zandi, chief economist at Moody’s, said that even as wage growth slows, it should still continue to stay above inflation.

For consumers, that means real — if small — gains.

‘With each passing month, it gets a teeny bit better,’ Zandi said. He continued: ‘There’s a slightly brighter hue in terms of people’s responses. It’s not an event; it’s a process — the feeling that wages are outpacing inflation, that purchasing power [is] improving. That’s what’s happening, but it will take a while to convince to people it’s real and sustainable.’

This post appeared first on NBC NEWS
0
FacebookTwitterGoogle +Pinterest
previous post
Awalé Announces New Gold Discovery on the Odienné Project
next post
Alaska, United flight cancellations continue amid ongoing investigation of Boeing 737 Max 9

Related Posts

T-Mobile to acquire most of U.S. Cellular in...

May 30, 2024

Honda recalls almost 304,000 Accords and HR-Vs over...

November 28, 2023

Amazon ‘anti-union propaganda,’ employee surveillance loom over labor...

February 18, 2025

Restaurant chain Hooters files for bankruptcy protection to enable founder-led...

April 2, 2025

On air, ’60 Minutes’ reporter says ‘none of...

April 29, 2025

U.S. Steel CEO appeals to Trump after Biden...

January 9, 2025

Nvidia CEO Huang says AI has to do...

March 1, 2025

Four minors found working at Alabama poultry plant...

May 21, 2024

See how the prices have changed for popular...

August 11, 2023

A year after Silicon Valley Bank failed, another...

March 2, 2024

    Sign up for our newsletter to receive the latest insights, updates, and exclusive content straight to your inbox! Whether it's industry news, expert advice, or inspiring stories, we bring you valuable information that you won't find anywhere else. Stay connected with us!


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Popular

    • 1

      Top 10 Countries for Natural Gas Production (Updated 2024)

      April 6, 2024
    • 2

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 3

      Top 10 Uranium-producing Countries (Updated 2024)

      April 18, 2024
    • 4

      A GOP operative accused a monastery of voter fraud. Nuns fought back.

      January 3, 2025
    • 5

      Australian abolitionist, Grace Forrest, receives coveted ‘Freedom from Fear’ award

      April 13, 2024
    • 6

      Top 9 Nickel-producing Countries (Updated 2024)

      April 23, 2024
    • 7

      LME Sanctions on Russian Metal Push Copper, Nickel and Aluminum Prices Higher

      April 17, 2024

    Categories

    • Business (1,027)
    • Investing (2,044)
    • Politics (2,977)
    • Uncategorized (20)
    • World (3,345)
    • About us
    • Contact us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: thriftybanker.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 thriftybanker.com | All Rights Reserved