By Manuel Gutierrez, Consulting Economist to NKBA

Inflation appears to be easing, as the consumer price index fell by 0.1 percent in December. While it is a small decline, it is the second time in the past six months that prices have dropped (the first time was 0.02 percent drop in July). Prices rose by an average of 0.9 percent in the first half of last year, but inflation fell to just 0.16 percent in the second half of 2022.

Here are some highlights from the December report, including the role energy is playing in overall inflation:

• Prices are still up 6.5 percent compared to a year ago, but the trend is encouraging; Annual inflation was running at 7.1 percent in November, and peaked at 9 percent last June.

• Core inflation, the underlying inflation rate that excludes volatile food and energy prices, fell to 5.7 percent in December, down from 6 percent in November. It peaked in September at 6.7 percent.

• Total housing costs in December are 0.7 percent higher than November and rose 8 percent in the prior year.

• Household appliance prices were virtually flat in December, and are just 1.1 percent higher YOY, while flooring prices jumped 12.5 percent from a year ago and window prices rose 3.2 percent.

• Interestingly, gasoline, and energy products are the two categories bringing inflation down. Gas prices fell 9.4 percent in December, although they were still 1.5% higher YOY, while general energy inflation is down 4.5 percent for the month; however, it is still 7 percent higher than December 2021.

• Food prices are still a drag on consumers’ wallets. They rose 0.3 percent in December and are 10.4 percent higher YOY. Food staples are seeing extraordinary spikes YOY, like butter, up 39 percent; flour, up 35 percent; and coffee, up 30 percent.  Transportation costs could be the culprit, as they are up 15 percent from a year ago.