December Inflation Sees Fastest Price Growth in 40 Years With Food Costs Still Being Impacted the Most

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Inflation added another half of a percent to its unending upwards climb last month. The Consumer Price Index increased .5% in December on a seasonally adjusted basis, after rising .8% in November the U.S., The Bureau of Labor Statistics reported this morning.

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This now brings overall inflation to an increase of 7 percent over the last 12 months. 

Prices for food have been some of the largest contributors to inflation over the last year and although the food index increased last month by .5 percent, it increased less than in recent months. In December, food at home prices increased another .4 percent. While that continues to be worrisome, the increase declined slightly from the .8 percent rise in November.

Five of the six major grocery store food group indexes increased in December, with fruits and vegetables rising the most adding .9 percent over the month and the index for fresh fruits increasing 1.8 percent. 

Prices for milk and dairy also increased, adding another .7 percent, while the index for cereals and bakery products increased .4 percent.

Overall, food at home rose 6.5 percent over the past 12 months. Historically, inflation rates for this category hover around 1.5 percent. The biggest contributor to the increase was the index for meats, poultry, fish and eggs — the protein prices went up 12.5 percent over the past year.

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Food away from home rose .6 percent, seeing an increase of 8 percent for limited-service meals and 6 percent for full-service meals. However, food at work and school dropped 49.3 percent in the past year as free breakfast and lunch became prevalent across the country.

Another potential sign of relief — energy prices started coming down. The energy index declined in December, finally ending a long series of increases. The index fell .4 percent as the indexes for gasoline and natural gas both decreased. That may well change next month as January is seeing record prices for oil again.

The 7 percent all items index increase for the 12 months ending December marks the largest 12-month increase since the period ending June 1982. Beyond food and energy, there was an overall inflation increase of 5.5 percent over the past 12
months, something that hasn’t been seen since February 1991.

Also contributing to the increase were the indexes for shelter and for used cars and trucks. Indexes for household furnishing and operations, apparel, new vehicles and medical care all also increased in December.

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There were decreases, however, including the indexes for motor vehicle insurance and recreations.

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Federal Reserve Chair Jerome Powell recently stated that tighter monetary policy and rate hikes will be needed to control inflation, after having taken a mostly bearish stance throughout 2021 that price hikes would be transitory.

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About the Author

Georgina Tzanetos is a former financial advisor who studied post-industrial capitalist structures at New York University. She has eight years of experience with concentrations in asset management, portfolio management, private client banking, and investment research. Georgina has written for Investopedia and WallStreetMojo. 
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