Energy and food prices drove inflation in December
RBC Chief Economist Frances Donald explains how inflation affects average households on Making Money.
Inflation rose in December to its highest level since July with much of the increase driven by increasing energy and food prices.
The Labor Department released the consumer price index (CPI) – a broad measure of how much everyday goods like gasoline, groceries and rent cost – for December, which showed that prices were 2.9% higher than a year ago following a 0.4% increase from the prior month, which was larger than what LSEG economists estimated.
Much of the increase in prices was due to higher energy and food costs that are straining household budgets.
Over 40% of the monthly CPI increase was attributed to rising energy prices, as the Bureau of Labor Statistics' energy index increased 2.6% in December after energy prices had shown little change in the preceding months and were down 0.5% on an annual basis last month.
INFLATION RISES 2.9% IN DECEMBER, IN LINE WITH EXPECTATIONS
Energy prices posted a notable rise in December, with gas prices a notable contributor. (Luis Sinco/Los Angeles Times via Getty Images/File)
Energy prices were flat in July, then posted declines of 0.8% and 1.9% in August and September, respectively, before flattening out in October. They rose by 0.2% in November before the larger 2.6% uptick in December.
Gas prices were a significant contributor to the rise in the energy index, as they increased 4.4% in December. Similar to the broader energy index, gas prices had declined by 0.6% in August, 4.1% in September and 0.9% in October before rising at the end of the year with a gain of 0.6% in November, ahead of the larger increase last month.
The price of utility gas service also rose in December,
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