U.S. consumer price inflation eases in December, accelerates for whole of 2019

U.S. consumer prices rose below consensus expectations in December. On a sequential basis, the headline inflation came in at 0.2 percent, a deceleration from November’s 0.3 percent. In the whole of 2019, inflation accelerated to 2.3 percent from 2018’s 1.9 percent.

Energy prices and medical care commodities mainly contributed to the inflation outturn for the month. Energy prices rose 1.4 percent sequentially, its third consecutive monthly rise and up from November’s 0.8 percent. The reflected a marked rise in the gasoline index, which rose 2.8 percent sequentially. For the whole of 2019, energy prices rose 3.4 percent. Medical care commodities rose markedly by 1.5 percent sequentially, with a yearly rise of 2.5 percent.

Food inflation continues to be weak. The food index rose 0.2 percent in December after rising 0.1 percent in November. On a year-on-year basis, food index rose 1.8 percent. Core inflation slowed down to 0.1 percent sequentially, coming in below market expectations. On a year-on-year basis, core inflation remained stable at 2.3 percent in December.

Core services inflation slowed down to 0.2 percent sequentially. The price for medical care services rose 0.4 percent in the month, the same as in November. On a year-on-year basis, the price rose 5.1 percent. The shelter index rose 0.2 percent sequentially, while the transportation index fell 0.3 percent. Overall, core services inflation rose 3 percent year-on-year, unchanged from November.

Core goods prices came in flat in the month. New vehicle prices rose 0.1 percent following five straight months of falls, while used vehicle prices fell 0.8 percent for the month. Apparel prices rose 0.4 percent sequentially, but for the year it fell 1.2 percent. In all, core goods prices rose slightly by 0.1 percent year-on-year.

“Given recent news of a phase-one trade deal with China, which would result in a lowering of tariff rates, the impetus for price increases may be further abated. All this points to moderating inflation heading into 2020”, said TD Economics in a research report.