U.S. inflation has been decelerating since its 40-year high in June 2022, but consumers today are still reeling from the high prices of many goods and services.
Inflation fell by 0.1% in December and rose 6.5% over the last 12 months, according to the latest Consumer Price Index (CPI) report. This marked the “smallest annual increase since October 2021,” the Bureau of Labor Statistics (BLS) said.
While many consumers are still struggling to overcome the high prices, some signs indicate a slowdown in inflation and an increased likelihood that the Federal Reserve will successfully guide the U.S. into a soft landing.
Whether the country goes into a soft landing or a hard landing in 2023, U.S. consumers will still feel the negative impacts of higher prices. In early 2021, the going narrative by Fed officials was that inflation was supply-chain driven and would only be transitory. Given the 40-year high set in June, this was a misconception.
Some of the largest 12-month increases, according to December’s CPI report, include food at home, which was up 11.8%; fuel, up 41.5%; transportation services, up 14.6%; energy utilities, up 19.3%; and shelter, up 7.5%.
In terms of food prices, meats, poultry, and fish all increased by 1.0% in December, while eggs rose by a whopping 11.1%. Eggs have since more than doubled since last month’s CPI report, up nearly 80%, according to The Wall Street Journal, which notes that food-price increases remain above the overall inflation trends, as measured by their changes since January 2020.
Purchasing eggs locally as of January 13 cost consumers roughly $5.12 for a dozen, $7.54 for an 18-pack, and $25.30 for a box of 60, per The Dallas Express reporting.
Delivering food to grocery stores and consumers comes with a steep price during times of inflation.
Since January 2020, prices at the pump have risen to double that of overall inflation, despite modest month-over-month declines in gasoline prices. The price for fuel fell at its fastest pace in six months, dropping 16.6% in December, according to the latest CPI data.
Car and truck prices contributed to the sharp increases in 2022, partly because of the pandemic-related supply chain issues on top of the global chip shortage. Although they remain elevated, many transportation-related costs have begun to level off, according to the BLS.
The recent decreases in vehicle prices were aided by month-on-month drops in new vehicle prices (- 0.1%) as well as the easing costs for used vehicles (-2.5%).
At the end of December, transportation expenses, which include fuel costs and vehicle prices, had risen roughly 23% from pre-pandemic lows, according to historical price data reported by the WSJ.
As consumers start to see a drop in transportation categories, they are conversely seeing increases in energy and energy utilities.
Consumers paid 14.3% more for electricity in 2022 than they did the year prior, more than double the overall 6.5% rise in inflation, according to the BLS. In addition, energy services rose 15.6% year-over-year, with the index for natural gas increasing 19.3%.
This year, the National Energy Assistance Directors’ Association estimates that consumers will pay 10.2% more, or $1,359, to heat their homes with electricity this winter over last year.
Before consumers can heat their homes for the winter, they must first be able to afford the home and the general shelter-related costs that come with being a homeowner.
Although shelter and housing costs have decelerated in recent months, December’s 7.5% year-over-year reading was more than double the 3.3% year-over-year reading reported in January 2020. Gasoline was the largest contributor to the monthly price decrease in December, more than offsetting increases in shelter costs, the BLS said.
“Last year we saw huge increases in these market rent measures in June, July and August, but they’re now coming in at or below their pre-pandemic pace,” UBS Economist Alan Detmeister said. “That suggests we should now be past the peak for monthly CPI rent increases.”
Due to the mix of high inflation and high-interest rates, many landlords have been forced to raise prices. Interest rates alone have helped drive up mortgage costs, making it more expensive for would-be homebuyers to own a home.
