Announced this morning, the Consumer Price Index (CPI) increased 0.3% in December, as expected. On an annual basis it grew 2.7%, also as expected and the same as the previous annual increase. The core rate, which excludes prices for food and energy, increased 0.2% in December, less than expected. The core rate grew 2.6% on an annual basis, also less than expected and the same as the previous annual measure.
Looking at the individual categories, monthly prices for Utility (piped gas) services, up 4.4%, Food categories, up 0.7%, and Apparel, up 0.6%, were relatively strong while monthly prices for Fuel Oil, down -1.5%, Used Cars and Trucks, down -1.1%, and Gasoline, down -0.5%, were relatively weak. Prices for Shelter were up 0.4%, above levels that were last measured.
Overall, a decent report on inflation with as expected monthly increases in December for the headline measure and less than expected increases for the core rate. Price increases in utility gas services and food were offset with lower prices for used cars and trucks as well as gasoline. Consumer spending has remained strong per recent GDP reports and tariffs now in place continue to put some upward pressure on costs.
Core rates were less than expected on an annualized basis which is welcomed, but they remain above the Federal Reserve’s stated 2.0% annual target. Considering this dynamic, the Fed will have much to contemplate in upcoming meetings as the unemployment rate ticked lower in last week’s employment data. Upcoming quarterly earnings results and individual company outlooks will be a key input for the markets in the coming weeks.
In all, the 10-year US treasury yield ticks lower following the report and equity futures are higher as we head into the market open.
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