Great Lakes Wire

The Consumer Price Index rose 0.5% in December, ending the year up 7%, the highest 12-month increase since June 1982, the U.S. Department of Labor reports.

Housing and used vehicles saw the largest cost increases, according to the Jan. 12 released by the Bureau of Labor Statistics. Food was up slightly, 0.5%, while energy costs decreased 0.4%, according to the report. The core CPI, which excludes food and energy costs, rose 5.5%, the largest 12-month increase since February 1991. Counted separately, food was up 6.3% and energy up 29.3% over the past year, the BLS reports.

"Increases in the indexes for shelter and for used cars and trucks were the largest contributors to the seasonally adjusted all items increase," the BLS reports. "The food index also contributed, although it increased less than in recent months, rising 0.5% in December."

The increase in consumer prices is being caused by the lingering effects of the COVID-19 pandemic and the massive supply-chain disruptions that resulted, according to Reuters, and has drawn the attention of the Federal Reserve. Reuters and other news outlets are reporting the Federal Reserve is expected to raise interest rates as soon as March.

Chris Zaccarelli, chief invest officer at Independent Advisor Alliance in Charlotte, N.C, told Reuters that the expected March rate increase won't be the only one.

"The Fed is going to be forced to begin raising rates in March and depending on the political pressure on them – from both sides of the aisle – they are going to have to raise rates four or more times in this year and potentially more than that next year," Zaccarelli said in the Reuters report. 

The 0.6% gain in average hourly earnings was pretty much wiped out by the 0.5% increase in the CPI, making for a net gain in wages a paltry 0.f% after being adjusted for inflation, the BLS reported Jan. 18. Compared to last year, hourly wages decreased by 2.4% when accounting for inflation.

Meaning, for example, a 0.1% wage increase would increase Michigan's median household income of $57,144, as reported by the U.S. Census, to $57,715.  

One bright spot was the 2.4% decline in fuel prices, with gasoline down 0.5%, from November, according to the BLS report. The cost of energy also was down 0.4% in December from November's 3.5% increase. This was the first decrease in energy since April, BLS reports.