PREVIEW: What to Look for in the December Consumer Price Index

01/11/2022 12:00am

(The monthly Consumer Price Index (CPI) is scheduled for release by the Bureau of Labor Statistics on Wednesday, January 12 at 8:30 AM Eastern Time.)

The big issue with the December CPI is whether we are starting to see any reversals in the sharp price increases we saw over the last year. The surest bet in this category is gas prices. In November and December, the price of oil fell sharply on the world market from its October highs. It has since regained some of this ground, but we should expect to see lower gas prices in December than in November, which should help to lower the overall CPI.

There is a wide range of goods where supply chain issues pushed up prices in the last year. New and used cars are at the top of the list, although we have not yet seen enough of a recovery in supply to begin to push prices back down. That probably will take another couple of months.

However, there have been sharp price increases in a wide range of household items. The index for the prices of household furnishings and supplies, which covers everything from furniture and linen to major appliances, rose 6.0 percent over the last year. We will likely start to see some reversal in December.

There is a similar story with apparel. The index rose 5.0 percent over the last year. It had been on a steady downward path before the pandemic and is likely to start moving lower again soon. 

Rental inflation has also been accelerating. This has a huge weight in the CPI, so it’s a big deal. It’s also a big chunk of people’s spending. There has been an interesting pattern where rent hikes have been very small in high-priced cities like New York and San Francisco, while being very rapid in low-priced cities like Detroit and Atlanta. It will be interesting to see if this pattern continues.

CEPR produces same-day analyses of government data on employment, inflation, GDP and other topics. Follow @DeanBaker13 on Twitter to get his quick-take analysis of government data immediately upon release.

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