January 13, 2021 | 09:03
U.S. CPI (Dec. 2020) — Core Remains a Bore
Bottom Line: Although rising energy and food costs have pressured headline inflation moderately higher, the underlying trend remains stable.
Consumer prices rose an expected 0.4% in December, raising the yearly rate two tenths to 1.4%. Gasoline cost 8.4% more in the month but still 15.2% less than a year ago. Food was 0.4% more expensive in the month and 3.9% more in the year. Curiously, prices for food consumed at home and away rose similarly in 2020, despite much weaker demand for the latter, reflecting increased supply-chain and pandemic-related costs for restaurants.
Core prices rose a light 0.1%, holding the yearly rate at 1.6%, the latter within a tight range for the sixth straight month and still well below pre-pandemic levels of 2.4%. Higher monthly costs for clothing (though still down 3.9% y/y), auto insurance, household furnishings and new autos were mostly offset by lower costs of recreation, used vehicles, medical care, and airfares (and down 18.4% y/y). Rents were up just 0.1% in the month and just over 2% in the past year, far less than the rise in home prices amid shifts spurred by remote working.
The spiraling second wave of caseloads will likely keep a damper on consumer prices in the leisure and hospitality sector for a few more months, though some upward pressure will mount as restrictions are eased and the economy strengthens later this year. We expect inflation to drift moderately higher in the year ahead, though not sufficiently to spur an increase in Fed policy rates.