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First Cut: December CPI got a mild boost from gasoline, shelter, and medical services

The Consumer price Index was up 0.2% in December from November and up 2.3% year-over-year. The core CPI was up 0.1% month-over-month and also up 2.3% year-over-year. The total was boosted somewhat by higher energy prices in December (up 1.4%) which were in turn driven by a quick rise in gasoline costs (up 2.8%).  The BLS mentioned that the main factors as bringing up prices were gasoline, shelter, and medical care. Where gasoline costs can vary a lot month-to-month depending on oil prices, the latter two tend to feed into more sustained changes in prices at the core.

Shelter costs were up 0.2% in December from the prior month and up 3.2% compared to a year-ago. Shelter costs have a weight of about 33.5 in the CPI basket of goods while food and energy comprise about 13.3 and 7.5, respectively. Steady upward pressure on hosing costs is not sparking overheating in prices, but it is one of the reasons the CPI remains closer to the Fed’s 2% symmetric inflation target.

Higher prices for services is another. Where overall commodities prices were up 0.4% in December due to energy, the year-over-year increase was a soft 1.5%. However, prices for services were up 0.2% from the prior month and up 2.8% compared to December 2018. Services costs are getting upward pressure from healthcare. Medical care services were up 0.2% month-over-month in December, but 5.1% higher than a year ago. However, while the cost of health insurance was up 1.4% compared to the prior month, it skyrocketed 20.4% from a year-ago. Individuals and families who get health insurance through an employer are not going to be as affected by this, but those who pay their own premiums are going to feel the pinch in terms of discretionary income.

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