In June 2022, inflation in America reached its highest level in 40 years. However, according to the latest data from the US Bureau of Labor Statistics (BLS), it had declined significantly by December 2023. This decline can be attributed to several factors, such as the US Federal Reserve increasing interest rates, supply chain efficiencies, and falling gasoline prices.
Even though inflation has subsided, consumers are still feeling the brunt of higher prices. This is because prices are much higher than before the pandemic. If we compare prices in December 2023 to January 2020, overall prices have increased by 19%, food prices have increased by 25%, energy prices have increased by 26%, and prices of shelter services have increased by 21% (figure below see).
Let’s look at the trends Various measures of inflation Reported by BLS:
- headline inflation Decrease from 9.1% in June 2022 to 3.4% in December 2023. it refers The overall increase in the average price level of all goods and services in an economy, The BLS refers to this as the “all items” category. On an annual average basis, it is expected to decline from 8.0% in 2022 to 4.1% in 2023.
- food inflation Decrease from 10.4% in June 2022 to 2.7% in December 2023. Increase in average price of food over time, Within the food category, the BLS distinguishes between “food at home” and “food away from home”. eat at home The category includes grocery store purchases, such as fruits, vegetables, dairy products, meat and other essential foods. It declined from 12.2% in June 2022 to 1.3% in December 2023. eating away from home The category includes meals and snacks purchased from restaurants, cafes and other food establishments. It remains somewhat elevated. In December 2023, inflation for meals away from home was 5.2%.
- energy inflation It has declined from 41.6% in June 2022 to -2.0% in December 2023. This is another important aspect of overall inflation, as energy costs have a significant impact on both households and businesses. The BLS classifies energy inflation into two main categories: energy goods and energy services. energy commodities This includes the physical energy resources consumed, such as fuel oil, gasoline, diesel fuel, and other motor fuels. It declined from 60.6% in June 2022 to -2.9% in December 2023. energy services Includes electricity and utility (piped) gas services. It declined from 19.4% in June 2022 to -1.1% in December 2023.
- core inflation Decrease from 5.9% in June 2022 to 3.9% in December 2023. The consumer price index measures price changes for all goods except food and energy., This exclusion is based on the idea that food and energy prices may be more volatile and subject to short-term fluctuations, which may not necessarily reflect underlying inflationary pressures in the broader economy. The BLS refers to this as the “all items less food and energy” category.
- For goods inflationThe BLS reports inflation rates for various commodity categories, including “Commodities Less Food and Energy Commodities, It declined from 7.2% in June 2022 to 0.2% in December 2023. Subcategories include Home Decor and Supplies (window and floor coverings, furniture, bedding, appliances, equipment, housekeeping supplies), apparel (for men, women and babies, as well as shoes and jewellery), transport goods with low motor fuel (new vehicles, used cars, parts), medical care items (prescription and non-prescription drugs, devices), entertainment items (Video/Audio Products, Pets, Sporting Goods), education and communication goods (books, computers, smartphones), alcoholic beveragesAnd other items (tobacco, personal care products). A decline in inflation was observed across all items except medical care items (see figure below).
- For service inflation, the BLS reports inflation rates for various service categories, including “services less energy services.” It remained high at 5.3% in December 2023 “Shelter” subcategory, which is an attractive category for all services Which includes shelter rent, water and sewerage maintenance, garbage and waste collection, household operations. medical care services (hospital, insurance, professional), Transportation Services (rent, maintenance, insurance, public), entertainment services (Video/Audio, Pets, Movie/Event Tickets), Education and Communication Services (tuition, telephone, internet), and Other personal services (Legal, financial, personal care, laundry etc.). Shelter inflation has remained stable and remains high at 6.2% in December 2023.
Looking ahead to 2024, Forrester expects headline inflation to decline from an average of 4.1% in 2023 to 2.6% in 2024. We expect headline inflation to decline to 3.0% in 2024, mainly due to the expected decline in services inflation. These estimates are based on Forrester’s analysis of BLS inflation data and other macroeconomic indicators. We will continue to monitor BLS inflation data and provide periodic updates as more actual data become available.
This blog was written by Principal Forecast Analyst Jitendra Miglani and originally appeared on Here,
Source: www.forbes.com
