CPI Rose 0.5% in December, Annual Inflation at a 39 Year High

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CPI Rose 0.5% in December on Higher Prices for Food, Shelter, Clothing, Vehicles, & Furniture; Annual Inflation at a 39 Year High

The consumer price index rose 0.5% in December, as higher prices for food, clothing, shelter, new and used vehicles, airline fares, furniture, and laundry appliances and were partly offset by lower prices for energy, recreational goods, car and truck rentals, and for vehicle insurance . . . the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices averaged 0.5% higher in December, after rising by 0.8% in November, by 0.9% in October, by 0.4% in September, by 0.3% in August, by 0.5% in July, by 0.9% in June, by 0.6% in May, by 0.8% in April. by 0.6% in March, 0.4% in February, 0.3% in January, and by 0.2% last December . . . the unadjusted CPI-U index, which was originally set with prices of the 1982 to 1984 period equal to 100, rose from 277.948 in November to 278.802 in December, which left it statistically 7.0364% higher than the index reading of 260.474 in December of last year, which is reported as a 7.0% year over year increase, up from the 6.8% year over year increase reported a month ago, and the greatest one year price increase since June 1982 . . . with lower energy prices a drag ob the overall index increase, seasonally adjusted core prices, which exclude food and energy, were up by 0.6% for the month, as the unadjusted core price index rose from 282.754 to 283.908, which left the core index 5.4534% ahead of its year ago reading of 269.226, which is reported as a 5.5% year over year increase, up from the 4.9% year over year core price increase that was reported in November, and the greatest year over year core price increase since February 1991…

The volatile seasonally adjusted energy price index fell 0.4% in December, after rising by 3.5% in November, by 4.8% in October, by 1.3% in September, by 2.0% in August, by 1.6% in July, by 1.5% in June, after being unchanged in May, falling by 0.1% in April, rising by 5.0% in March, by 3.9% in February, by 3.5% in January, and by 2.6% last December, and is now 29.3% higher than in December of a year ago . . . the price index for energy commodities was 0.6% lower in December, while the price index for energy services was 0.1% lower, after rising 0.3% in November . . . the energy commodity index was down 0.6% on a 0.5% decrease in the price of gasoline, and a 2.4% decrease in the price of fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 0.6% higher . . . within energy services, the price index for utility gas service fell 1.2% after rising 0.6% in November but is still 24.1% higher than it was a year ago, while the electricity price index rose 0.3% in December after rising 0.3% in November . . . energy commodities are still averaging 48.9% higher than their year ago levels, with gasoline prices averaging 49.6% higher than they were a year ago, while the energy services price index is up 10.4% from last December, as electricity prices are still 6.3% higher than a year ago…

Meanwhile, the seasonally adjusted food price index rose 0.5% in December, after rising by 0.7% in November, by 0.9% in October, by 0.9% in September, by 0.4% in August, 0.7% in July, by 0.8% in June, by 0.4% in May, by 0.4% in April, by 0.1% in March, by 0.2% in February, by 0.1% in January and by 0.3% last December, and after being unchanged last November, as the price index for food purchased for use at home was 0.4% higher in December, after rising 0.8% in November and 1.0% in October, while the index for food bought to eat away from home was 0.6% higher, as average prices at fast food outlets rose 0.6% and average prices at full service restaurants rose 0.8%, while food prices at employee sites and schools averaged 7.9% lower…

In the food at home categories, the price index for cereals and bakery products was 0.4% higher, as average bread prices were unchanged while the price index for rice, pasta, cornmeal rose 1.3%, the price index for crackers and bread and cracker products rose 2.7%. the price index for cookies rose 1.8%, and the price index for breakfast cereal rose 1.4% . . . on the other hand, the price index for the meats, poultry, fish, and eggs food group was 0.4% lower, as the price index for beef and veal fell 2.0%, the price index for pork fell 0.8%, and the price index for poultry other than chicken fell 1.1% . . . however, the seasonally adjusted price index for dairy products was 0.7% higher, as milk prices rose 1.3%, and the price index for ice cream and related products rose 1.2% . . . at the same time, the fruits and vegetables price index was 0.9% higher, as the price index for fresh fruits rose 1.8%, the price index for canned fruits rose 2.7%, and the price index for frozen vegetables rose 3.0% . . . meanwhile, the beverages price index was 0.8% higher, as the price index for carbonated drinks rose 1.2%, the price index for noncarbonated juices and drinks rose 0.9%, and the price index for coffee was unchanged . . . lastly, the price index for the ‘other foods at home’ category rose 0.6%, as the price index for sugar and sweets rose 1.2%, the price index for margarine rose 3.8%, and the price index for olives, pickles, and relishes was 0.8% higher….

The itemized list for price changes of over 100 separate food items is included at the beginning of Table 2 for this release, which also gives us a line item breakdown for prices of more than 200 CPI items overall . . . since last December, the price index for uncooked beef steaks is still up 21.4%, the price index for uncooked beef roasts is up 22.1%, the price index for ground beef is up 13.0%, the price index for other beef and veal is up 23.2%, the price index for bacon and related products is up 18.4%, the price index for ham is up 10.1%, the price index for pork chops is up 12.5%, the price index for “other pork including roasts, steaks, and ribs” is up 18.9%, the price index for fresh and frozen chicken parts is up 11.5%, the price index for fresh fish and seafood is up 10.2%, the price index for eggs is up 11.1%, and the price index for ‘other fats and oils including peanut butter’ but not butter or margarine is up 12.9%, while the price of food at employee sites and schools has fallen 49.3% over the past year, on a 63.7% drop in food prices at elementary and secondary schools…

Among the seasonally adjusted core components of the CPI, which rose by 0.6% in December after rising by 0.5% in November, by 0.6% in October, by 0.2% in September, by 0.1% in August, by 0.3% in July, by 0.9% in June, by 0.7% in May, 0.9% in April, 0.3% in March, and by 0.1% in February, and after being unchanged in January and December of 2020, the composite price index of all goods less food and energy goods was 1.2% higher in December, while the more heavily weighted composite for all services less energy services rose 0.3%….

Among the goods components, which will be used by the Bureau of Economic Analysis to adjust December’s retail sales for inflation in national accounts data, the price index for household furnishings and supplies was 1.3% higher, as the price index for laundry equipment rose 3.4%, the price index for living room, kitchen, and dining room furniture rose 3.1%. the price index for dishes and flatware rose 1.3%, and the price index for household cleaning products rose 1.6% . . . at the same time, the apparel price index was 1.7% higher on a 4.2% increase in the price index for men’s shirts and sweaters, a 3.4% increase in the price index for women’s suits and separates, a 2.2% increase in the price index for women’s outerwear, and a 2.0% increase in the price index for women’s footwear . . . in addition, the price index for transportation commodities other than fuel was 2.1% higher, as prices for new cars were 1.5% higher, prices for used cars and trucks were 3.5% higher, tire prices were 1.9% higher, and the price index for parts and equipment other than tires rose 1.6% . . . meanwhile, the price index for medical care commodities was unchanged. as prescription drug prices rose 0.1% but nonprescription drug prices fell 0.4%, while the price index for medical equipment and supplies was 0.5% higher . . . on the other hand, the recreational commodities index was 0.4% lower on a 2.5% decrease in TV prices, a 1.9% decrease in the price index for other video equipment rose 1.7%, a 1.2% decrease in the price index for recreational reading materials, and a 2.3% decrease in the price index for sporting goods including bicycles . . . at the same time, the education and communication commodities index was also 0.4% lower on a 0.8% decrease in the price index for smartphones and a 1.0% decrease in the price index for computers, peripherals, and smart home assistants . . . lastly, a separate price index for alcoholic beverages was 0.5% higher, while the price index for ‘other goods’ was 0.2% higher on a 0.8% increase in the price index for cigarettes and a 1.2% increase in the price index for stationery, stationery supplies, and gift wrap . . . the consumer price index for commodities less food and energy commodities is now up 10.7% from a year ago, the largest annual rise in that index since May 1975…

Within core services, the price index for shelter was 0.4% higher as rents rose 0.4% and homeowner’s equivalent rent was 0.4% higher, and as prices for lodging away from home at hotels and motels rose 1.3%, while at the same time the shelter sub-index for water, sewers and trash collection was 0.4% higher, while the price index for domestic services was 2.4% higher . . . in addition, the price index for medical care services was 0.3% higher, as the price index for eyeglasses and eye care rose 0.6% and the price index for health insurance rose 1.6% . . . on the other hand, the transportation services price index was 0.3% lower even though the price index for airline fares rose 2.7%, as the price index for car and truck rentals fell 5.3%, the price index for motor vehicle repair fell 1.7%, and the price index for motor vehicle insurance fell 1.5% . . . at the same time, the recreation services price index fell 0.1% as the price index for video discs rentals and other media services fell 0.9%, the price index for photographers and photo processing fell 1.5%, and the price index for admissions to sporting events fell 1.5% . . . meanwhile, the index for education and communication services was 0.1 higher as the price index for day care and preschool tuitions rose 0.2% and the price index for delivery services rose 0.8%, and the price index for internet services and electronic information providers rose 0.3% . . . lastly, the index for other personal services was 0.7% higher as the price index for laundry and dry cleaning services was 1.2% higher and the price index for apparel services other than laundry and dry cleaning services was 2.8% higher…

Among core line items, the price index for car and truck rental, which is still 36.0% higher than a year ago, the price index for used car and trucks, which is now up 37.3% from a year ago, the price index for new cars, which has risen 12.0% in the same span, the price index for new trucks, which is up 11.6% since last November, the price index for tires, which is up 12.4% over the same period, the price index for vehicle body work, which is now up 10.6% year over year, the price index for lodging away from home including at hotels and motels, which has now risen 27.6% from a year ago, the price index for bedroom furniture, which has risen 10.4% year over year, the price index for living room, kitchen and dining room furniture, which is now up 17.3% over the last 12 months, the price index for “other” furniture, which is up 10.4% from a year ago, the price index for laundry equipment, which has risen 12.1% over the same span, the price index for window coverings, which has risen 10.7% since last December, and the price index for men’s suits, sport coats, and outerwear, which is up 12.9% from a year ago, have all seen prices rise by more than 10% over the past year, while the price index for smartphones, which has fallen 14.1% from a year ago, is the only core line item to have decreased in price by a double digit magnitude over that one year span…

Retail Sales Fell 1.9% in December after Prior Months Were Revised Lower; PCE Goods to Add ~0.34 Basis Points to Q4 GDP

Seasonally adjusted retail sales decreased in December after retail sales for October and November were revised lower…the Advance Retail Sales Report for December (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $626.8 billion during the month, which was 1.9 percent (±0.5%) lower than November’s revised sales of $639.1 billion, but was 16.9 percent (±0.9 percent) above the adjusted sales in December of last year . . . November’s seasonally adjusted sales were revised more than 0.1% lower, from $639.8 billion to $639.1 billion, while October’s sales were revised slightly lower, from $638.2 to $638.1 billion; as a result, the October to November change was revised up from an increase of 0.3 percent (±0.5%) to a increase of 0.2 percent (±0.2%), and the quarter over quarter increase for the 4th quarter was reduced to 2.1% . . . estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated actual sales rose 10.0%, from $649,933 million in November to $714,988 million in December, while they were up 16.9% from the $611,429 million of sales in December a year ago, so we can see how the large December seasonal adjustment knocked the big holiday sales increase we’d normally expect down to a negative print…

Since it’s the end of the quarter and the end of the year for retail sales, we’ll include the entire table from this report showing retail sales by business type, including the quarter over quarter data…again, to explain what this table shows, the first double column below shows us the seasonally adjusted percentage change in sales for each kind of business from the November revised figure to this month’s December “advance” figure in the first sub-column, and then the year over year percentage sales change since last December in the 2nd column; the second double column pair below gives us the revision of the November advance estimates (now called “preliminary”) as of this report, with the new October to November percentage change under “Oct 2021 r” (revised) and the November 2020 to November 2021 percentage change as revised in the 2nd column of that pair (for your reference, the table from the advance estimate of November sales, before this month’s revisions, is here) . . . then, the third pair of columns shows the percentage change of the most recent 3 months of this year’s sales (October, November and December) from the preceding three months of the 3rd quarter (July, August and September) and then from the same three months (October, November and December) of a year earlier . . . that first column of the last pair thus gives us a snapshot comparison of 3rd quarter sales to fourth quarter sales, which could be useful in estimating the impact of retail sales on 4th quarter GDP, after those sales are adjusted for price changes….

To compute December’s real personal consumption of goods data for national accounts from this December retail sales report, the BEA will use the corresponding price changes from the December consumer price index, which we reviewed above . . . to estimate what they will find, we’ll first separate out the volatile sales of gasoline from the other totals . . . from the third line on the above table, we can see that December retail sales excluding the 0.7% price-related decrease in sales at gas stations were down by 2.0% . . . then, subtracting the figures representing the 0.5% decrease in grocery & beverage sales and the 0.8% decrease in food services sales from that total, we find that core retail sales were down by 2.5% for the month . . . since the CPI report showed that the composite price index for all goods less food and energy goods was 1.2% higher in December, we can thus approximate that real retail sales excluding food and energy will show an decrease of almost 3.7% . . . however, the actual adjustment for each of the types of sales shown above will vary by the change in the related price index . . . for instance, while nominal sales at clothing stores were 3.1% lower in December, the apparel price index was 1.7% higher, which would mean that real sales of clothing fell by around 4.7% . . . similarly, while nominal sales at motor vehicles and parts dealers were down 0.4%, the price index for transportation commodities other than fuel increased by 2.1%, which would suggest that real sales at motor vehicles and parts dealers were down around 2.5% . . . on the other hand, while nominal sales at sporting goods, hobby, music and book stores fell 4.3%, the price index for recreational commodities fell 0.4%, so we can figure real sales of recreational goods were down roughly 3.9%…

In addition to figuring those core retail sales, to make a complete estimate of real December PCE, we’ll need to adjust food and energy retail sales for their price changes separately, just as the BEA will do . . . the CPI report showed that the food price index was 0.5% higher in December, with the index for food purchased for use at home 0.4% higher and prices for food bought to eat at restaurants 0.7% higher . . . hence, with nominal sales at food and beverage stores 0.5% lower, real sales of food and beverages would be down around 0.9% in light of the 0.4% higher prices . . . likewise, the 0.8% decrease in nominal sales at bars and restaurants, once adjusted for 0.7% higher prices, suggests that real sales at bars and restaurants fell about 1.5% . . . meanwhile, while sales at gas stations were down 0.7%, there was a 0.5% decrease in the retail price of gasoline, which would suggest real sales of gasoline were only down around 0.2%, with the caveat that gasoline stations do sell more than gasoline, and we haven’t accounted for those other sales . . . by weighing and averaging the real sales changes that we have thus estimated back together, and excluding food services, we can estimate that the income and outlays report for December will show that real personal consumption of goods fell by ~ 3.1% for the month, after falling by a revised 0.9% in November, but after rising 1.5% in October, by 0.3% in September, and by 0.7% in August . . . at the same time, the 1.5% decrease in real sales at bars and restaurants would subtract more than 0.1% from December’s real personal consumption of services…

With those estimates for the relative change in real PCE goods between the months of the 3rd and the 4th quarter, we should be able to also estimate the change in PCE goods between those two quarters….by setting July’s real PCE goods as an index equal to 100, we can then say that August’s real PCE goods would be equal to 100.7, and from that, we’d get index values of 101.0 for September, 102,5 for October,101.6 for November, and 98.5 for December . . . we then compute the quarter over quarter change in those index values at an annual rate to determine the probable change that would be applied to 4th quarter GDP… (((102.5 + 101.6 + 98.5 )/3) / ((100 + 100.7 + 101 )/3)) ^4 = 1.01198, which means that real PCE goods are rising at an 1.2% annual rate over the fourth quarter, based on our estimates for the percentage change between the 4th quarter months . . . since real PCE goods has been running at 28.3% of GDP, that suggests that 4th quarter PCE goods would add roughly 0.34 percentage points to 4th quarter GDP….