Energy prices jump, helping drive hotter-than-expected inflation in December
Electricity and gasoline costs ticked up in December, contributing to a hotter-than-expected inflation print for the month.
The latest Bureau of Labor Statistics data released Thursday showed the Consumer Price Index (CPI) rose 3.4% year over year in December, an uptick from November's 3.1% annualized increase.
On a month-over-month basis, inflation rose by 0.3% versus expectations of a 0.2% jump.
Apart from a rise in the shelter index, food and energy prices also rose.
“The energy index rose 0.4% over the month as increases in the electricity index and the gasoline index more than offset a decrease in the natural gas index,” said the BLS press release.
Electricity prices rose 1.3% over the prior month. Meanwhile, the gasoline index increased 0.2% in December, following a 6% decrease in November. However, the BLS noted that before a seasonal adjustment, gasoline prices actually fell 5.8% last month.
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Seasonal adjustment involves factoring out seasonal patterns that can cause price variations, such as changing climatic conditions and holidays.
Compared to a year ago, however, energy costs are down 2%. Gasoline prices, natural gas prices, and fuel oil have decreased by 1.9%, 13.8%, and 14.7%, respectively.
In contrast, the index for electricity rose 3.3% over the last year
"Core" inflation, which strips out the volatile costs of food and energy, rose 3.9% over the prior year, slightly higher than estimates for 3.8%.
The index for shelter continued its upward trend in December, contributing to over half of the monthly all-items increase, according to the BLS release.
Gasoline prices were on a downward trend heading into December, reaching their lowest levels of the year. On Thursday, the national average for gasoline sat at $3.08 per gallon, according to AAA data.
Gasoline inventories reached the highest level in a year last week, signaling weakening demand. Stockpiles rose by more than 8 million barrels versus expectations for gains of more than 2 million barrels, according to data released by the Energy Information Administration.
Winter is a seasonally slow season for gasoline as snowstorms and cold weather impact driving habits. However, the surge in inventories appears to be outsized, equaling the largest two-week build since 2016.
Oil futures spiked on Thursday after Iran seized an oil tanker in the gulf of Oman, fueling worries of deeper tensions between the US and Iran.
West Texas Intermediate (CL=F) advanced more than 2% during the morning session. Brent (BZ=F) futures also rose more than 2%, trading above $78 per barrel.
Iranian military seized the tanker carrying Iraqi oil in retaliation for the confiscation of the same vessel by the US last year, according to Iranian state media.
“The Geopolitical escalation in the Red Seas area has once again reversed the bearish futures tilt,” Dennis Kissler, senior vice president at BOK Financial, said on Thursday.
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Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.
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