U.S consumer prices climb 0.2% in December despite weaker monthly underlying inflation

U.S consumer prices climb 0.2% in December despite weaker monthly underlying inflation
  • U.S Bureau of Labor Statistics announces December's CPI to have improved by 0.2%.
  • Healthcare costs rose in December and underlying inflation remained soft.
  • Annual gain in core CPI was recorded at 2.3% in 2019.
  • U.S dollar remained unchanged as investors waited for the U.S and China to sign the phase 1 trade deal.

The U.S Bureau of Labor Statistics announced December’s consumer prices index on Tuesday that showed a slight improvement last month despite the loss of pace in monthly underlying inflation as well as the increment in healthcare costs. The data, as per the analysts, aligns itself with the U.S Federal Reserve’s plans of keeping the rates unchanged this year.

According to the Labor Department, the weakness in the inflation report counters December’s job growth that was revealed in the past week. Economists interpreted that the data hints at a significant loss of domestic demand. While the fourth quarter saw the economy recording a steady growth rate, much of the support was contributed by the falling imports.

U.S Monthly CPI Matched Analysts’ Expectations For December

As per the report, the United States consumer prices index gained by 0.2% in December that matched with what the analysts were expecting for the month. In November, however, the index had climbed 0.3%. The data also highlighted CPI’s slowly declining growth rate after October’s report that had highlighted a 0.4% jump for the month.  

In terms of annual growth, CPI recorded a massive 2.3% improvement in 2019 that marked the best since 2011. In 2018, the consumer prices index was declared to have grown by 1.9%. The monthly gain of 0.3% as well as the year over year growth of 2.3% aligned with the analysts’ expectations.

Excluding the food and energy segments that are known for volatility, the data represented a 0.1% increase in CPI as compared to 0.2% that was posted in November. The so-called core CPI, on the other hand, was seen 0.1133% higher (unrounded) in December’s report as compared to November’s 0.2298%.

Annual Gain In Core CPI Was Recorded At 2.3% In 2019

December’s weaker underlying inflation, as per the experts, was largely associated with the falling prices for airline tickets, used vehicles, and household furnishing that in turn offset the hike in prices of apparel, healthcare, recreation, new motor vehicles, and motor vehicle insurance. The annual gain in the core CPI was recorded at 2.3% in 2019. In 2018, the figure was capped at a marginally lower 2.2%.

The economic data on Tuesday, however, was unable to stir volatility in the forex market. The greenback remained stable against a range of currencies since investors had their eyes set on the officializing ceremony of the phase 1 trade deal between the U.S and China on Wednesday. The deal is likely to push the two largest economies of the world towards diffusing the trade war that has weighed on the global financial markets for 18 months.

By Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His passion has given him first hand experience of trading, while his writing means he understands the market forces and wider regulation.
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