CPI: Core A Touch Stronger Than Expected

Bottom Line: Headline consumer inflation rose in December, mostly in-line with estimates, as core CPI rose a touch more than expected. Core CPI over the last three months of 2017 rose at 2.5% annualized, accelerating from the 1.8% annualized pace for all of 2017. Cell phone plans and apparel prices caused a marked decline in the core metric in Spring of '17. As base effects of year-on-year changes come through, these factors should now cause a modest upward acceleration in core prices over the coming months. The largest core component, shelter, also saw a modest acceleration in price in late '17, furthering the rebound in core CPI. The CPI ROSE by 0.1% in December, compared with market expectations for an increase of 0.1%. Food prices increased by 0.16% while energy prices fell by 1.2%. Prices for gasoline fell by 2.7% while prices for fuel oil increased by 0.3%, prices for electricity climbed by 0.1%, and prices for natural gas rose by 1.2%. Energy prices are now 6.9% ABOVE their year ago level. Overall consumer prices are now 2.1% ABOVE their year ago level; in December 2016, consumer prices were 2.1% ABOVE their year ago level. The Core CPI ROSE by 0.3%, compared with market expectations for an increase of 0.2%. Prices for commodities excluding food and energy commodities rose by 0.2%.

• Gains in used cars & trucks (+1.4%),
• medical care (+1.0%),

were offset by declines in

• tobacco (-0.6%),
• apparel (-0.5%).

Prices for services excluding energy services rose 0.3% with moderate increase in

• shelter (+0.4%),
• transportation (+0.3%), and
• owner's equivalent rent (+0.3%).

Core consumer prices are now 1.8% ABOVE their year ago level; in December 2016, consumer prices were 2.2% ABOVE their year ago level.