US inflation edges up, fuelled by energy and housing prices, but many other costs rise only mildly

WASHINGTON (AP) — Higher energy and housing prices boosted overall US inflation in December, a sign that the Federal Reserve's drive to slow inflation to its 2 per cent target will likely remain a bumpy one.

Thursday's report from the Labor Department showed that overall prices rose 0.3 per cent from November and 3.4 per cent from 12 months earlier. Those gains exceeded the previous 0.1 per cent monthly rise and the 3.1 per cent annual inflation in November.

The December figures were slightly above economists' forecasts.

More than half the increase in prices from November to December reflected higher housing costs.

Energy costs, led by electricity and gasoline, along with food prices, also contributed to inflation.

Excluding volatile food and energy costs, though, so-called core prices rose just 0.3 per cent month over month, unchanged from November's increase. Core prices were up 3.9 per cent from a year earlier — the mildest such pace since May 2021.

Economists pay particular attention to core prices because, by excluding costs that typically jump around from month to month, they are seen as a better guide to the likely path of inflation.

Inflation has cooled more or less steadily since hitting a four-decade high of 9.1 per cent in mid-2022.

Still, despite the slowdown in price increases, along with steady economic growth, low unemployment and healthy hiring, polls show many Americans are dissatisfied with the economy.

That disconnect, which will likely be an issue in the 2024 elections, has puzzled economists and political analysts. A major factor is the lingering financial and psychological effects of the worst bout of inflation in four decades. Much of the public remains exasperated by higher prices. Prices are still 17 per cent higher than they were before the inflation surge began and are still rising.

Pollsters and economists say there has never been as wide a gap between the underlying health of the economy and public perception. Wage gains have outpaced inflation in recent months, meaning that Americans' average after-inflation take-home pay is up. Yet a poll conducted in November by The Associated Press-NORC Center for Public Affairs Research, about three-quarters of respondents described the economy as poor. Two-thirds said their expenses had risen.

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