Consumer Price Index (CPI): December 2024 (Insights & Analysis)
An analysis of CPI data released today (Jan 15) ending in December 2024...
Today (Jan 15, 2025) the U.S. Bureau of Labor Statistics released December 2024 CPI (Consumer Price Index) data which measures the avg. change over time that consumers pay for a fixed basket of goods and services (e.g. food, housing, transportation, healthcare).
The CPI is used by central banks (U.S. Fed) to gauge inflation trends and optimize interest rate policies.
According to this report inflation is up but it’s nothing significant - mostly “business as usual.” It’s still above the Fed’s target rate of ~2%, but not high enough to spook investors.
CPI Basics
CPI (Consumer Price Index): A measure of how prices change over time for a “basket” of goods and services (like groceries, rent, gas, etc.). When the CPI goes up, it means you’re generally paying more for those things.
Month-over-Month (MoM): Compares prices this month to last month.
Year-over-Year (YoY): Compares prices this month to the same month last year.
Headline Inflation: This is the overall CPI number, which includes everything (food, energy, housing, etc.).
Core Inflation: This is the CPI without food and energy. Economists track this to see underlying price trends because food and energy can swing a lot from month to month.
High-Level Inflation (December 2024)
Headline inflation is at 2.9% year over year, still below early 2023 peaks, but it has ticked up slightly from prior months (2.7% in November).
Core inflation sits at 3.2%. Energy was the biggest driver of December’s increase.
Month-Over-Month (Seasonally Adjusted)
All items: +0.4% in December (after +0.3% in November)
All items less food and energy (core CPI): +0.2% in December (after +0.3% in each of the previous four months)
Year-Over-Year (Unadjusted)
All items: +2.9% through December 2024 (up from +2.7% through November)
Core CPI (all items less food and energy): +3.2% over the last 12 months
Food: +2.5% over the last 12 months
Energy: -0.5% over the last 12 months
CPI Analysis (Dec ‘24): Food vs. Energy vs. Core
A.) Food
Overall: +0.3% m/m (vs. +0.4% m/m in Nov.), +2.5% y/y
Food at Home: +0.3% m/m; +1.8% y/y
Standouts:
Cereals & bakery +1.2% m/m (after -1.1% in Nov.)
Meats, poultry, fish & eggs +0.6% m/m; specifically, eggs jumped +3.2% m/m
Nonalcoholic beverages -0.4% m/m
Food away from home: +0.3% m/m; +3.6% y/y
Limited service meals +0.4% m/m
Full service meals +0.2% m/m
Takeaway: Food inflation slowed somewhat in December compared to November, but still contributed to overall price growth. Eggs remain volatile (+3.2% m/m) after big swings in prior months.
B.) Energy
Energy overall: +2.6% m/m; -0.5% y/y
Gasoline: +4.4% m/m; -3.4% y/y
Fuel oil: +4.4% m/m; -13.1% y/y
Natural gas: +2.4% m/m; +4.9% y/y
Electricity: +0.3% m/m; +2.8% y/y
Takeaway: Energy swung higher in December due largely to a gasoline spike (+4.4%). However, on a 12-month basis, total energy costs remain slightly lower (-0.5%) because of earlier declines in 2024. Fuel oil is still down sharply year over year.
C.) Core (All Items Except Food & Energy)
Core CPI: +0.2% m/m (vs. +0.3% in Nov.); +3.2% y/y
Shelter: +0.3% m/m; +4.6% y/y
Owners’ equivalent rent +0.3% m/m
Rent of primary residence +0.3% m/m
Lodging away from home -1.0% m/m (but up +2.6% y/y)
Used cars & trucks: +1.2% m/m; -3.3% y/y
New vehicles: +0.5% m/m; -0.4% y/y
Medical care: +0.1% m/m; +2.8% y/y
Airline fares: +3.9% m/m; +7.9% y/y
Motor vehicle insurance: +0.4% m/m; +11.3% y/y (notably high)
Takeaway: Core inflation eased slightly to +0.2% month over month, as shelter rose at a moderate +0.3% pace—still the biggest single contributor in core. Used cars posted a second straight monthly increase. Airline fares jumped significantly in December, though they remain volatile.
Specific Trends & Observations (Dec 2024)
Energy’s Rebound: Gasoline soared 4.4% month over month, reversing some prior declines. This alone contributed a large portion of the monthly headline gain. However, y/y gasoline price is still down 3.4% because of the bigger declines earlier in 2024.
Shelter’s Slowing 12-Month Pace: Shelter rose 4.6% y/y—its smallest 12-month gain since January 2022. Month-over-month growth for rent and owners’ equivalent rent held at +0.3%. A moderation in shelter inflation is consistent with some private-market rent data, though it remains an elevated 12-month figure.
Egg Prices and Food: Eggs jumped 3.2% in December after prior volatility. Overall food inflation is at +2.5% y/y, well below the peak rates earlier in 2023. Restaurant prices (food away from home) continue rising more quickly than grocery prices on a 12-month basis (3.6% vs. 1.8% at home).
Used Vehicles: +1.2% m/m in December, the second consecutive monthly increase, although still down 3.3% y/y. This hints that used car prices, after a long slump, may be stabilizing or inching upward again.
Services Inflation: Services less energy services: +0.3% m/m, +4.4% y/y. Within that, some standout subcomponents:
Motor vehicle insurance: +11.3% y/y
Airline fares: +3.9% m/m, +7.9% y/y
Medical care services: +0.2% m/m, +3.4% y/y
Core Goods vs. Core Services: Core goods (excluding food & energy commodities) have mostly been soft or negative year over year (-0.5%). Meanwhile, core services remain the main inflation driver (+4.4% y/y for services less energy). This divergence is typical of the post-2023 environment, with services inflation outrunning goods.
Potential Policy & Economic Implications
Fed Rate Path: Headline inflation at 2.9% y/y is below prior peaks. However, core inflation at 3.2% is still above the Fed’s 2% target, suggesting ongoing caution. The data might reinforce the Federal Reserve’s stance of “fewer rate cuts than previously projected,” given that inflation is still running a bit hotter in certain areas (e.g., services).
Consumer Spending: Food inflation is moderate. Gasoline’s monthly spike can pinch consumer budgets, but overall energy is still down y/y. This may allow for steady consumer spending, albeit with pockets of strain if gas prices remain volatile or if shelter costs keep families squeezed.
Wages vs. Prices: With core around 3.2%, real wage growth depends on wage trends. If wages are outpacing 3.2%, real disposable income grows. If not, it may dampen consumption.
Sectoral Outlook
Housing: Though y/y rent inflation is softening, it’s still elevated. Potential new supply plus smaller monthly gains could gradually bring the shelter CPI component down further in coming months.
Auto Market: The re-acceleration in used car prices may reflect still-limited supply or shifting consumer preferences. This might keep used vehicle inflation from returning fully to pre-2021 patterns.
Air Travel: The 3.9% monthly jump in airline fares is notable, potentially reflecting holiday travel demand or cost pass-through from labor/fuel.
Will This CPI Data Significantly Change Investing Behavior?
If inflation had come in hotter (e.g. ~3.5%) or monthly prints of 0.7% it might have spooked markets a bit, raising odds of a more hawkish Fed… but 2.9% YoY is near consensus expectations.
The mild inflation data generally calms markets… no abrupt shift in sentiment. I wouldn’t change any investment thesis based on these data. Equities and crypto should continue to do well.
Other catalysts like: Trump’s inauguration (Jan 20), Fed commentary (Jan 28), corporate earnings, and Trump policy announcements/implementation are where I’d focus.
I’d classify the current macro as somewhat risk-on and relatively stable.
1. No Drastic Shifts Likely
The CPI data is neither scorchingly high (causing panic about more rate hikes) nor suddenly low (promising rapid Fed cuts). For the typical investor, this is a relatively middle-of-the-road, “steady as she goes” scenario.
2. Incremental Adjustments
Equity Allocations: Some may tilt a bit more toward cyclical or consumer discretionary stocks if they see stable inflation and stronger consumer spending.
Crypto Allocation: Bitcoin enthusiasts might remain confident or even add to positions if they think a gentle Fed stance supports risk assets—but we’re unlikely to see the massive run-ups that come with major liquidity injections.
Bond Holdings: With no near-term rate spike expected, some investors might ladder bonds or extend duration, expecting yields to plateau.
3. Narrative vs. Reality
Media headlines may emphasize that inflation is rising from 2.7% to 2.9%, but it’s still quite low compared to levels seen in 2022–2023.
This contrast to the high-inflation era can keep investor sentiment relatively calm. Unless future reports show a big jump, it’s not likely to alter long-term strategies drastically.
Overall:
Equities: Likely a mild positive. Inflation is moderate, so no aggressive Fed action.
Crypto (BTC): Could see modest tailwinds from a stable rate environment, but no major liquidity-fueled rally unless the Fed pivots to actual rate cuts.
Other Segments: Bonds might see stable-to-lower yields; real estate might reflect continued moderation in price gains.
This Dec ‘24 CPI release suggests a continued “soft-landing” style environment: inflation not low enough for sudden rate cuts, but not high enough to spark new rate hikes.
That scenario generally supports a cautious but not fearful outlook across asset classes. Investors may make small shifts at the margins (slightly more risk-taking in equities or crypto) but aren’t likely to overhaul portfolios based on this one data point.
Final Take: December 2024 CPI Data
The December 2024 CPI report reveals a modestly higher monthly inflation figure driven largely by energy. Core inflation softened slightly to 0.2% month over month, consistent with an ongoing deceleration but still above the Fed’s target.
Headline CPI: +2.9% year-over-year (+0.4% month-over-month)
Core CPI: +3.2% year-over-year (+0.2% month-over-month)
Largest month-over-month contributor: Energy (+2.6%), especially gasoline (+4.4%)
Shelter: +4.6% year-over-year, slowing but still a key driver of overall inflation
Food: +2.5% year-over-year, with most grocery categories moderating compared to last year
The Fed and markets will watch whether elevated services prices (particularly shelter, vehicle insurance, airline fares) continue to moderate in 2025.
What to Watch Next:
Whether the jump in energy prices was a one-month bump or a longer trend.
If core prices continue to come down (especially shelter), headline inflation could get closer to 2%—the Federal Reserve’s main target. If not, they might keep interest rates higher for longer.