Inflation Spiked in December After Trending Down for Months

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Facts

  • The US Bureau of Labor Statistics (BLS) reported Thursday that the Consumer Price Index (CPI) rose 3.4% for the 12 months ending December, accelerating 0.3% from the previous month. Excluding food and energy prices, inflation rose at a the same rate as in November.1
  • According to the agency, the larger-than-expected inflation rate for December was mostly due to a 0.4% jump in the monthly housing index, as well as increases of 0.2% and 0.4% in food and gas prices, respectively.2
  • Another blow to the CPI was restaurant prices, which climbed 5.2% from a year earlier, as wages for lower-paid occupations have reportedly grown faster than the national average and pressured prices up on the services side.3
  • However, this latest reading is considerably down compared to the 6.5% rise in December 2022, indicating some progress on the long process to bring the inflation rate back to the Federal Reserve's 2% target.4
  • As Fed officials search for conclusive evidence that pandemic inflation has come to an end, there are expectations that the policy rate will be kept steady in their upcoming meeting on Jan. 30-31. Financial markets anticipate that rate cuts will begin in March.5
  • Further economic data is due to be released in the following days, with fourth-quarter earnings season gaining traction as big bank stocks release their financial reports starting on Friday. Next week, the Census Bureau will publish its December Retail Sales report, while the University of Michigan will report its preliminary January Consumer Sentiment Index.6

Sources: 1BLS, 2New York Post, 3Wall Street Journal, 4CNN, 5Reuters and 6Forbes.

Narratives

  • Republican narrative, as provided by Townhall. Further monthly inflation spikes are bad enough, but more important ahead of this year's election is that Americans are paying 23% to 37% more on groceries and 28% more to heat their homes than when Biden took office, all while real weekly earnings have plunged 4.5%. Despite claims that the inflation fight was over, this latest CPI report doesn't comes as a surprise. Biden and his fellow congressional Democrats have spent exorbitant amounts of money they don't have — this is the end result of 'Build Back Better' and 'Bidenomics.'
  • Democratic narrative, as provided by New York Times. Consumer sentiment prior to Trump's election through today showed Democrats offering optimism at every point except during the market crash around COVID. Republican sentiment, however, immediately skyrocketed when Trump took office and then plummeted the second he was out. The economy has been on a roll over the past year — unemployment reaching a 50-year low, inflation consistently dropping — but the GOP has corrupted sentiment polls by changing their tune based on who's in office.

Predictions