Biggest gain for US core consumer prices almost a year
Washington — Underlying US consumer prices recorded their largest increase in 11 months in December amid strong gains in the cost of rental accommodation and healthcare, bolstering expectations that inflation will gain momentum in 2018.
The labour department said its consumer price index (CPI) excluding the volatile food and energy components rose 0.3% in December, also as prices for new motor vehicles, used cars and trucks and motor vehicle insurance increased.
That was the biggest advance in the so-called core CPI since January 2017 and followed a 0.1% gain in November. Core CPI increased 1.8% in the 12 months to the end of December, picking up from 1.7% in November. Economists polled by Reuters had forecast core CPI rising 0.2% month-on-month and holding steady at 1.7% on an annual basis.
Weak import and producer price reports this week had raised concerns about the inflation outlook, although the two reports did not have a strong correlation with the CPI data.
Economists were hoping that a tightening labour market, rising commodity prices and a weak dollar would lift inflation toward the Federal Reserve’s 2% target in 2018.
The US central bank’s preferred inflation measure, the personal consumption expenditures price index excluding food and energy, has undershot its target since May 2012.
The US central bank is forecasting three rate hikes in 2018. It increased borrowing costs three times in 2017.
Supporting the rise in underlying inflation pressures in December, rents increased 0.4%. Owners’ equivalent rent of primary residence climbed 0.3% after gaining 0.2% in November. The cost of medical care increased 0.3%, with prices for prescription medication surging 1% after rising 0.6% in November. The cost of both hospital and doctor visits increased 0.3%.
Households also paid more for new motor vehicles, which rose 0.6% in price in December, the biggest gain since January 2017.
The cost of motor vehicle insurance increased 0.6%. Apparel prices, however, fell 0.5%. Cheaper petrol prices limited the increase in the overall CPI to 0.1% in December after climbing 0.4% in November. That lowered the year-on-year increase in the CPI to 2.1% from 2.2% in November.
In December, petrol prices fell 2.7% after rebounding 7.3% in November. Food prices rose 0.2% after being unchanged for two straight months.