Consumer inflation climbs 0.4% in December on higher gas prices, CPI finds

Consumer inflation climbs 0.4% in December on higher gas prices, CPI finds

The numbers: Prices of consumer goods and services — the cost of living — rose in December at the fastest clip since last summer as Americans paid more to fill up their gas tanks.

The consumer price index advanced 0.4% last month, the government said Wednesday, marking the largest gain since August.

Economists polled by Dow Jones and The Wall Street Journal, sister publications of MarketWatch, had forecast a 0.4% gain.

Read: The U.S. lost 140,000 jobs in December

Yet the pace of inflation over the past year was still quite low at 1.4%. The yearly rate increased from 1.2% in the prior month.

Before the pandemic began last spring, consumer inflation was running at a much higher 2.3% pace.

What happened: About 60% of the increase in consumer inflation last month was tied to higher gasoline prices.

The cost of gasoline jumped a seasonally adjusted 8.4% in December, though the actual increase to consumers was much smaller.

See: MarketWatch Coronavirus Recovery Tracker

In any case, gasoline prices are still 15% below year-ago levels. People are staying home and driving less during the pandemic and there’s not as much demand for fuel.

The cost of food — groceries and eating out — increased 0.4% last month.

If gas and food are excluded, the rate of inflation rose a smaller 0.1%, in December based on a less volatile “core” measure of prices.

The core rate of inflation over the past year was unchanged at 1.6% for the third month in a row.

Prices of other important consumer goods and services were mixed. Rents rose and the cost of clothing increased sharply, for instance, but prices for used vehicles, medical care, drugs and recreation all declined.

Read: Restaurants eliminate another 372,000 jobs in December

Big picture: Investors are talking about inflation again, but it’s likely to hover below 2% through the early spring and probably won’t pose a threat to the economy this year or next.

The big question is whether it will reach the Federal Reserve’s 2% target — and stay there. The Fed has said it’s willing to let inflation run above 2% for awhile until the economy has returned to normal.

Read: The bad news keeps coming for the economy. Just how bad is it?

What they are saying? ” Although rising energy and food costs have pressured headline inflation moderately higher, the underlying trend remains stable,” said senior economist Sal Guatieri of BMO Capital Markets.

Market reaction: The Dow Jones Industrial Average

and S&P 500

were set to open lower in Wednesday trades.

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