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* The consumer price index rose 0.4% in December
* The CPI increases by 1.4% year on year
* Core CPI gains 0.1%; increased by 1.6% over one year
WASHINGTON, Jan. 13 (Reuters) – U.S. consumer prices rose sharply in December amid skyrocketing gasoline costs, although core inflation remained tamed as the economy struggled against a industry raging COVID-19 pandemic.
The Labor Ministry said on Wednesday that its consumer price index rose 0.4% last month after gaining 0.2% in November. An 8.4% jump in gasoline prices accounted for over 60% of the rise in the CPI. In the 12 months ending in December, the CPI advanced 1.4% after rising 1.2% in November.
Last month’s CPI readings were in line with economists’ expectations. The CPI rose 1.4% in 2020. This was the smallest annual gain since 2015 and a deceleration from 2.3% in 2019.
The CPI has increased at an average annual rate of 1.7% over the past 10 years.
Excluding the volatile components of food and energy, the CPI rose 0.1% after rising 0.2% in November. The so-called core CPI has been constrained by falling prices for used cars and trucks, recreation, airline tickets, and health care.
The core CPI was up 1.6% year-over-year, matching November’s gain. It rose 1.6% in 2020 after rising 2.3% in 2019, which was lower than the average annual rate of 2.0% over the past 10 years.
US stock index futures were flat. The dollar appreciated against a basket of currencies. US Treasury prices were higher.
The service sector, which accounts for more than two-thirds of the US economy, has been hit hardest by the virus. The Federal Reserve tracks the basic personal consumption expenditure (PCE) price index for its inflation target of 2%, a flexible average. The PCE base price index is at 1.4%.
MIXED VIEWS
Economists are divided on the outlook for inflation this year. Some believe inflation will exceed its target, citing almost $ 900 billion in additional pandemic aid approved by the government at the end of December and expectations of further fiscal stimulus from the new president’s administration Joe Biden and Democratic-controlled Congress.
Biden will be sworn in next Wednesday. Indeed, yields on US Treasuries rose in anticipation of stronger economic growth in the second half of the year. A survey this month showed that a measure of prices paid by manufacturers jumped in December to its highest level since May 2018, likely reflecting supply chain bottlenecks caused by the virus.
But other economists expect the price pressures to remain benign, arguing that manufacturers have limited ability to pass increased production costs on to consumers, with at least 19 million Americans on the market. unemployment benefits. Tension in the labor market is also holding back wage growth, while high rent vacancy rates are likely to dampen rent inflation.
Nonetheless, all agree that year-to-year inflation will increase over the next few months as low coronavirus-related readings in March, April and May disappear from the calculation.
Gasoline prices rebounded 8.4% in December after two consecutive monthly declines. Food prices rose 0.4% after falling 0.1% in November. The cost of food consumed in the home increased 0.4%. Prices for food eaten away from the home also increased 0.4%, with full-service meals rising 0.3%.
The principal residence owner’s equivalent rent, which is what a landlord would pay to rent or receive from renting a home, edged up 0.1% after remaining unchanged in November. Many tenants have forbearance agreements with landlords.
Consumers continued to pay less for health care, as prices fell 0.2% after falling 0.1% in November. Prices for used cars and trucks fell 1.2%, down for a third consecutive month. The cost of air fares fell 2.3%. The prices of hotel and motel rooms remained unchanged.
But the prices of new motor vehicles rose 0.4%. Clothing prices climbed 1.4%. There were also price increases for home furnishings, personal care products and auto insurance. (Reporting by Lucia Mutikani; Editing by Alison Williams and Andrea Ricci)
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