AIER’s Everyday Price Index Ends 2023 With Third Consecutive Monthly Decline
From December 2022 to December 2023, headline CPI rose 3.4 percent, higher than expectations of a 3.2 percent reading.
In December 2023, the AIER Everyday Price Index (EPI) experienced a 0.55 percent decline, marking the third consecutive monthly decrease. The index now stands at 283.3, reflecting the 2023 change in the Everyday Price Index, which amounts to a 1.87 percent decline.
Among the categories in the December 2023 EPI, food away from home, housing fuels and utilities, cable satellite & livestreaming TV services, and admissions to movies, theaters, & concerts witnessed the highest monthly price increases.
Conversely, the prices of food at home, personal care products, and motor fuel experienced the largest declines. In total, twelve EPI components saw price increases, while two remained unchanged, and ten showed declines.
The US Bureau of Labor Statistics (BLS) released the Consumer Price Index (CPI) data for December 2023 on January 11th. The month-to-month headline CPI increased by 0.1 percent, surpassing the anticipated reading of 0.0 percent. The core month-to-month CPI rose by 0.3 percent, aligning with expectations.
Within the headline CPI on a month-to-month basis, the largest price increases were observed in meats, poultry, fish, and eggs, primarily driven by an 8.9 percent surge in the index for eggs. Additionally, food away from home and electricity witnessed significant price hikes, while cereals and bakery products, natural gas, and fuel oils experienced price declines from November to December.
Regarding the year-over-year basis, headline CPI rose by 3.4 percent from December 2022 to December 2023, surpassing the expected 3.2 percent reading. Similarly, core CPI increased by 3.9 percent instead of the anticipated 3.8 percent.
Food away from home and electricity contributed to the significant price rises in the year-over-year headline CPI, while gasoline, natural gas, and fuel oil experienced declines. In terms of core CPI, prices of shelter, motor vehicle insurance, recreation, personal care, and education accounted for the majority of the overall increase.
Despite the unexpected robust results revealed in the December 2023 CPI report, it is evident that achieving the Federal Reserve’s sustained 2 percent target range faces numerous obstacles. The recent reduction in disinflationary pressures related to core goods, which had previously eased price pressures, appears to have diminished.
Moreover, several businesses have already announced intentions to implement substantial price increases in 2024. For instance, California’s largest insurer plans to raise housing insurance premiums by 20 percent and car insurance premiums by 25 percent. Additionally, over half of the US states are set to increase the minimum wage, with Florida implementing an 18 percent raise and California boosting minimum wages for fast-food workers by 30 percent.
The global resurgence of inflationary pressures has also emerged as concerns escalate over escalating shipping expenses and surging oil prices. Ongoing Houthi rebel attacks in the Red Sea, which disrupt a crucial shipping route through the Suez Canal, have caused disruptions and heightened costs for manufacturers and retailers. Freight rates for transporting goods from Asia to Europe have risen by over 100 percent in the past four weeks, while fears of a wider regional conflict have driven upward movement in oil prices. In response to these attacks, the global benchmark Brent crude briefly surpassed the $80 per barrel mark, experiencing an increase of up to 4.3 percent.
Expecting a swift and linear continuation of the ongoing disinflationary trend, as well as potential Fed rate cuts starting in March 2024, may be overly optimistic in light of these factors.
In conclusion, the AIER’s Everyday Price Index has ended 2023 with its third consecutive monthly decline, highlighting potential challenges in achieving the Federal Reserve’s inflation target. Furthermore, the recently released CPI data for December 2023 reveals unexpected robust results. However, businesses planning significant price increases and the resurgence of inflationary pressures from shipping disruptions and oil price surges pose additional obstacles.
