Thursday, January 11, 2024

The Daily Money: Inflation edged up again in December

After tumbling in the fall, inflation edged up in December, underscoring that it's too soon to sound the all-clear after a historic inflation spike.

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The Daily Money

ALL THE MONEY NEWS YOU NEED TO KNOW

Thu Jan 11 2024
 

Daniel de Visé | Personal Finance Reporter

Good morning! It's Daniel de Visé with your Daily Money.

After tumbling in the fall, inflation edged up in December, Paul Davidson reports, underscoring that it's too soon to sound the all-clear after the biggest spike in consumer prices in four decades.

A rise in basic living expenses - rent, as well as food and gasoline prices - was the main culprit. Used car prices also rose unexpectedly.

Inflation is broadly headed lower, but a more gradual descent could lead the Federal Reserve to keep interest rates higher for longer.

Last month, overall prices rose 3.4% from a year earlier, according to the Labor Department's consumer price index. On a monthly basis, costs increased 0.3% after virtually flatlining the previous two months.

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Remember Fruit Stripe Gum? The iconic, brightly colored checkout-aisle staple is being discontinued after more than 50 years.

Food and Wine magazine reports that the gum's manufacturer, Ferrara Candy, announced this week that it will discontinue the gum.

Ferrara Candy did not respond to USA TODAY's request for comment but, in a statement, told Food and Wine magazine: "We have made the difficult decision to sunset Fruit Stripe Gum."

About The Daily Money

Each weekday, The Daily Money delivers the best consumer news from USA TODAY. We break down financial news and provide the TLDR version: how decisions by the Federal Reserve, government and companies impact you.
The hopes that inflation might soon moderate were dashed when the consumer price index for April rose 8.3% compared to last year. The producer price index for April confirmed this further. It rose 11% compared to the same month last year. The PPI measures input costs, or wholesale prices, from the point of view of producers. The prices of a very few items in the CPI have actually fallen over the past several months. At the top of this list - the price of food service at schools is plunging (down 43% in April compared with last year), as did the price of food service at businesses (down 30%). In each case, the fact that so many Americans work or attend school from home is likely the cause. The American consumer is caught in a vice. To a large extent, inflation has been caused by upward pressure on oil prices due to the Russian invasion of Ukraine. The war also affects wheat supplies. COVID-19 infections, which have raced through China's two largest cities and shuttered factories, have exacerbated global supply chain problems. ( These are the metros where families pay the least for food .) The Federal Reserve has been called upon, for decades, to help steer the economy between inflation and recession. The Fed does so by setting interest rates and buying bonds. Recently, it has been credited with helping drag the U.S. out of The Great Recession and the COVID-19-driven economic downturn. To accomplish these things, the Fed has kept interest rates near historic lows. This, in turn, has helped consumers with major purchases like homes. The need for Fed action has changed course, almost overnight, however. Rampant inflation has forced the Fed to raise rates, and it may further raise rates by as much as half a percentage four or five times this year. There is even talk about the possibility of a 0.75 point bump. And if rates are raised too aggressively, the economy could fall into a recession. ( This is the city with the cheapest groceries in every state .) To determine the consumer activity that is plunging in price, 24/7 Wall St. reviewed data on the consumer price index for all urban consumers from the Bureau of Labor Statistics.

Annual inflation moved higher in December after declining the previous two months. Core price gains, which exclude food and energy, slowed.

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Concerns about inflation have increased in recent months, as stimulus payments from the federal government increased the ability of consumers to spend more than they had since well before the COVID-19-driven recession. This was compounded by difficulties low-paying industries had attracting workers, which made them raise the wages of hundreds of thousands of workers. But just as the pandemic caused prices of some items to soar, it caused prices of other items to plunge. The price of "food at employee sites and schools" fell the most, most likely because many people are now working from home and schools are not at full capacity yet. On the flip side, the price of this household item is soaring . Consumer spending is not the only reason inflation fear has been rekindled for the first time since before The Great Recession. Fuel prices have risen over the course of the year, with a sharp increase in the price of oil. Housing prices have risen at an unprecedented pace, to some extent because of low mortgage rates. Can the government use traditional measures to keep down the prices of many items that make up the consumer price index, even after their recent increase? The Federal Reserve has set interest rates relatively low since the Great Recession to help stimulate the economy. But with the recent COVID-19 recession and inflation creeping up, the Fed may be running out of ways to influence rising prices. If the Fed raises rates to combat inflation, for example, it could put a damper on the already pandemic-stricken economy. Once a month, the Bureau of Labor Statistics provides the consumer price index, the most carefully followed set of data about monthly prices movement. The numbers are broken into dozens of individual categories. The most recent release was for August . Figures are compared to the immediately previous month and to the same month a year ago. In August, the CPI for Urban Consumers rose by 5.3% from the same month last year. The price of some items rose by double digits. Among them "beef and veal" rose 12.2%, fuel oil rose 28.6%, women's clothing jumped 11.9%, and used car prices rose 31.9%. The price of education has also been increasing, and not just during the pandemic. This is the cost of college the year you were born . Even as inflation has become a part of the economic landscape this year, the prices of some items fell in August, and several fell very sharply. A review of the list indicates that price decreases have been partially due to the pandemic. Food at employee sites and schools fell 42.5%. This may be due to a drop in students' attendance because of the virus and summer vacation. Food prices at employee sites were likely affected because of the working-from-home mandate in most companies. The price of telephone hardware and calculators, both often used in offices, dropped 15%. The price of sewing machines and fabric fell 10.8%.
 

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