The AIER Daily Price Index fell for the fifth time in six months

AIER’s daily price fell 1.3 percent in December after falling 0.2 percent in November. December was the fifth decline in the past six months. The daily price index increased by 7.3 percent from last year, the slowest since September 2021. Food and household utilities were major contributors to the rise in December but were more than offset by lower motor fuel prices.

Motor fuel prices, which are often an important driver of monthly changes in the daily price index due to significant weighting in the index and commodity volatility, fell 12.4 percent for the month (non-seasonally adjusted), minus 155 basis points. Prices for domestic fuel, utilities, and food outside the home rose 0.4 percent on the month, while prices for food at home rose 0.3 percent. Together, these three categories added 19 basis points to the overall index.

The Daily Price Index, including clothing, a broader measure that includes clothing and shoes, fell 1.3 percent in December, also the fifth decline in the past six months. Over the past year, the daily price index, including clothing, has increased by 7.0 percent, the lowest level since September 2021.

Apparel prices fell 1.7 percent on a seasonally unadjusted basis in December. Clothing prices tend to fluctuate on a monthly basis. From a year ago, clothing prices increased by 2.9%.

The consumer price index, which includes everyday and infrequent purchases, expensive items and contract fixed items, fell 0.3 percent on a non-seasonal basis in December. Over the past year, the consumer price index has increased by 6.5 percent.

Within the CPI, energy posted a 6.1 percent decline on a seasonally adjusted basis while food increased 0.3 percent. The consumer price index, excluding food and energy, rose 0.2 percent for the month (non-seasonally adjusted) while the 12-month change came in at 5.7 percent. The 12-month change in the core CPI was just 1.3 percent in February 2021 and 2.3 percent in January 2020, before the pandemic.

Seasonally adjusted, the consumer price index fell 0.1 percent in December while the core index rose 0.3 percent in the month. Over the past three months, the consumer price index rose at a much slower pace of 1.8 percent annually while the core index rose 3.1 percent.

Basically, commodity prices fell 0.3 percent in December, the third consecutive drop, making the three-month annual rate of change -4.8 percent. Commodity prices increased by 2.1% compared to last year.

Prices for basic services rose 0.5 percent for the month and 7.0 percent from a year ago. Among essential services, gainers include shelter, which accounts for 32.9 percent of the CPI, up 0.8 percent from the month. The Shelter Index rose 7.5 percent over the past year, accounting for a large share of the total increase in all items except food and energy.

The index for all items except food, energy and shelter, about 53 percent of the consumer price index, fell 0.1 percent in December, the third decline in a row. The latest three-month annual rate is -1.0 percent, which indicates that more than half of the CPI has experienced continuous deflation over the past three months.

There is growing evidence of a significant slowdown in the rate of price increases for many goods and services, although some rates of price increases remain high. Continuous increases in higher prices are likely to distort economic activity by influencing consumer and business decisions. Moreover, price pressures have led to an aggressive tightening cycle from the Fed, which has raised the risk of a policy misstep. The fallout surrounding Russia’s invasion of Ukraine continues to disrupt global supply chains while labor shortages and turnover continue to challenge businesses. Moreover, some recent measures of economic activity are weakening. All these factors maintain a high level of uncertainty about the economic outlook. Caution is required.

Robert Hughes

Bob Hughes

Robert Hughes joined AIER in 2013 after more than 25 years in financial and economic markets research on Wall Street. Bob was previously Head of Global Equity Strategy for Brown Brothers Harriman, where he developed an equity investment strategy that combined top-down macro analysis with bullish fundamentals.

Prior to BBH, Bob was chief equity analyst at State Street Global Markets, chief economic analyst at Prudential Equity Group and chief economist and financial markets analyst at Citicorp Investment Services. Bob holds an MA in Economics from Fordham University and a BA in Business Administration from Lehigh University.

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