If yesterday's rising PPI print suggested the Fed may continue its $10 billion a month taper at its next meeting, today's comparably rising CPI for December will likely mean that absent another payroll-like shock, the Fed will soon monetize "only" $65 billion per month. The reason: in December core consumer inflation rose by 0.3%, compared to the 0.0% change in November, and in line with expectations. Stripping away food and energy however, the increase was only 0.1%, also in line with expectations, and a decline from November's 0.2% increase. More importantly, on a Y/Y basis, core CPI was up by 1.7%, still shy of the Fed's 2% target but not too far.
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This is where the BLS said the growth was:
Advances in energy and shelter indexes were major factors in the increase in the seasonally adjusted all items index. The gasoline index rose 3.1 percent, and the fuel oil and electricity indexes also increased, resulting in a 2.1 percent increase in the energy index. The shelter index rose 0.2 percent in December. The indexes for apparel, tobacco, and personal care increased as well. These increases more than offset declines in the indexes for airline fares, for recreation, for household furnishings and operations, and for used cars and trucks, resulting in the index for all items less food and energy rising 0.1 percent.
For those seeking the lack of inflation in food, the BLS suggests you look in the fruit section:
The food index rose slightly in December, increasing 0.1 percent. The food at home index was unchanged for the third time in four months, as a sharp decline in the fruits and vegetables index offset other increases. The food index has not posted a monthly increase larger than 0.1 percent since June
The full breakdown by component:
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The narrative from the report:
Food
The food index rose 0.1 percent in December, the same increase as in November. The index for food at home was unchanged, although four of the six major grocery store food groups posted increases. The index for nonalcoholic beverages, which declined in November, rose 0.5 percent in December. The index for dairy and related products rose 0.4 percent for the second month in a row, while the indexes for meats, poultry, fish, and eggs and for other food at home both rose 0.3 percent. Offsetting these increases was a sharp decline in the fruits and vegetables index; it fell 1.5 percent as the fresh vegetables index declined 2.7 percent. The index for cereals and bakery products also declined, falling 0.1 percent. The index for food away from home rose 0.1 percent in December after a 0.3 percent increase in November.
Energy
The energy index rose 2.1 percent in December after falling in October and November. The energy index has now risen 0.2 percent over the last six months. The gasoline index, which fell 1.6 percent in November, rose 3.1 percent in December. (Before seasonal adjustment, gasoline prices rose 0.7 percent in December.) The fuel oil index also rose, increasing 2.4 percent in December. The electricity index rose 0.4 percent, its fourth consecutive increase. The only major energy component index to decline was the index for natural gas, which fell 0.4 percent, its third consecutive decrease.
All items less food and energy
The index for all items less food and energy rose 0.1 percent in December after a 0.2 percent advance in November. The shelter index rose 0.2 percent in December after a 0.3 percent increase in November. The rent index increased 0.3 percent, while the index for owners’ equivalent rent rose 0.2 percent. The index for lodging away from home fell 0.3 percent after rising in November. The apparel index rose 0.9 percent in December after declining in each of the three previous months. The tobacco index rose 0.6 percent and the personal care index increased 0.3 percent. The new vehicles index was unchanged in December, as was the medical care index. The index for medical care services rose 0.3 percent, but the index for medical care commodities fell 0.8 percent, as the prescription drugs index declined 0.9 percent. The airline fares index declined sharply in December, falling 4.7 percent after increasing in recent months. The indexes for recreation, for household furnishings and operations, and for used cars and trucks also fell in December.
But while the surge in gasoline prices was notable, despite the relentless din of empty CNBC chatterboxes pronouncing the plunge in gas prices, the biggest surprise was the collapse in prescrption drug prices, whichin December fell by the most on record. Thanks Obamacare!
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