MarketWatch First Take: Here’s where inflation hit your wallet hardest in 2017

Consumer prices rose about 2.1% in 2017, driven higher by the usual factors: The price of owning or renting a home, the price of filling the gas tank and the price of filling your belly.

Of course, the prices of some things fell: Wireless phone services were down sharply, and the costs of many manufactured goods, such as clothes, cars, hi-tech gadgets and furniture, dropped as well.

Also read: Higher rents and home prices drive increase in consumer prices

The Bureau of Labor Statistics makes it easy to see which items had the largest impact—positive and negative—on the consumer price index. It publishes Table 7 in each month’s report, detailing how much the change in price for each item contributed to or subtracted from the CPI.

The idea here is that things that consumers spend a lot of money on have a bigger weight in the CPI. About one-third of consumer spending goes for owning or renting a home, so it follows that even a relatively modest 3.2% rise in rental prices is going to have a bigger impact on your wallet than, say, a 15% rise in fuel-oil prices (which accounts for about 0.1% of the typical consumer’s budget).

The chart at the top of the page shows the 10 items that had the largest positive impact on the CPI in 2017, led by home ownership prices, which contributed 0.75 percentage points to the 2.1% rise in the CPI. Looked at another way, if ownership prices had been unchanged for the year, the CPI would have risen just 1.35% (2.1% minus 0.75%).

Gasoline prices jumped 10.7% in 2017. Although gas accounts for just 3.6% of aggregate consumer spending, that large price increase boosted the CPI by 0.35 percentage points. The prices of food to be consumed at home rose 1.6%, but because food accounts for a somewhat larger 13.6% of spending, even that modest increase was enough to boost the CPI by 0.07 percentage points.

Other notable increases that hit consumers’ wallets hard: car insurance prices rose 7.9%, cable TV prices (fueled by Netflix’s NFLX, +1.84%  new pricing) rose 4.8%, hospital services prices increased 5.1% and tobacco prices jumped 6.5%, mostly because of a big increase in the cigarette tax in California.

By contrast, items with falling prices had a much smaller impact on the CPI. The biggest drag on the CPI came from wireless phone services, which fell 10.2% as AT&T T, +1.15%  and Verizon VZ, -0.48%  switched to unlimited data plans in response to competition from smaller rivals Sprint S, +0.00%  and T-Mobile TMUS, -0.25%  . That’s going to be a one-off event, part of what Federal Reserve Chairwoman Janet Yellen has said is the “transitory” disinflation in a few items that could be masking broader inflation risks.

Similarly, prices of new and used cars also fell during the year, but have risen over the past few months.

Prices of other manufactured goods—apparel, computers, TVs, furniture and toys—have declined for decades and may continue to do so.

Looking ahead, the CPI will be driven higher or lower by a few large categories of spending: shelter, food, energy and medical care combined account for 68% of the CPI. Those are the items to keep your eye on.

Filed in: Top News Tags: 

You might like:

Why real-estate investors should steer clear of Turkey Why real-estate investors should steer clear of Turkey
NewsWatch: Meet the tech-savvy upstarts who think they can finally give Realtors a run for their money NewsWatch: Meet the tech-savvy upstarts who think they can finally give Realtors a run for their money
The Wall Street Journal: Trump slams social-media companies for ‘censorship’ of the right The Wall Street Journal: Trump slams social-media companies for ‘censorship’ of the right
Economic Preview: Sky is clear for sunny U.S. economy, but clouds are forming Economic Preview: Sky is clear for sunny U.S. economy, but clouds are forming
NewsWatch: The questions every investor should ask about Trump’s proposal to radically change how companies report earnings NewsWatch: The questions every investor should ask about Trump’s proposal to radically change how companies report earnings
Saving in a 401(k) for the first time? Here’s what you need to know Saving in a 401(k) for the first time? Here’s what you need to know
The Wall Street Journal: Kofi Annan, former UN secretary general, dies at 80 The Wall Street Journal: Kofi Annan, former UN secretary general, dies at 80
What you probably don’t know about Social Security What you probably don’t know about Social Security

Leave a Reply

Submit Comment
© 2018 Stock Investors News. All rights reserved. XHTML / CSS Valid.