Consumers pay more in December for food, rent

People in the US paid more for consumer goods at the end of the year, with figures released by the Bureau of Labor Statistics showing prices were 2.7 percent higher in December compared to December 2024, driven by stubborn inflation and the cost of housing.

The newly released data from the Labor Department's Consumer Price Index showed the effects of the continued cost of living crisis on people's wallets.

The CPI rose 0.3 percent on a month-to-month basis. There was a 0.4 percent rise in December compared to the month before with the cost of housing as the main driver of the increase.

President Donald Trump has attempted to tackle the high cost of housing across the board by instructing the Federal Housing Finance Agency — Fannie Mae and Freddie Mac — which oversees mortgages, to purchase $200 billion of bonds issued by the two companies in a bid to bring down mortgage rates.

The price of food increased the most in more than three years.

In November, the government shutdown artificially lowered inflation numbers, but December's figures reflected a truer state of the economy including the muted impact of tariffs on prices.

Gary C. Hufbauer, an expert on international trade and nonresident senior fellow at the Peterson Institute for International Economics, told China Daily that until the second quarter of 2025, US firms had absorbed the majority of the tariffs and consumers a smaller amount through higher prices on household items like clothing, footwear and furniture. But he expects "by the spring of 2026, most of the burden will be shifted to consumers through higher prices".

High prices for goods prompted worries from US consumers in the run-up to the holiday season in December.

But figures from the National Retail Federation showed that retail sales saw strong growth in December as consumers still spent on loved ones despite the cost, according to the CNBC/NRF Retail Monitor. Sales from Nov 1 through Dec 31 grew 4.1 percent, it said.

Sharp surge

"December Retail Monitor data saw a sharp surge in growth as consumers continued prioritizing holiday spending on family and friends," said NRF President and CEO Matthew Shay.

The move to lower prices will likely be a key issue this year for Trump and the Republicans as they try to retain control of Congress.

The president had partly campaigned on lowering costs for US people on "Day 1" of his administration, but the reality has been different in the first year of his second term in office.

Additionally, economists have cited his on-again, off-again tariff policy as sowing uncertainty for businesses and consumers.

At its Jan 27 to 28 meeting, the Federal Reserve is expected to keep its benchmark overnight interest rate in the 3.50 percent to 3.75 percent range.

That comes despite recent tensions and the opening of a criminal investigation into Federal Reserve Chair Jerome Powell by the US Department of Justice.

Energy prices were up in December. And the cost of fruits, vegetables, dairy products and beef all went up. The cost of a steak went up 17.8 percent year-on-year in December, the largest advance in four years.

"The US is the largest consumer of coffee worldwide, with annual imports of beans and ground coffee estimated at around $8 billion per year. About 30 percent of US coffee imports into the US come from Brazil," David A. Gantz, Will Clayton Fellow for Trade and International Economics at the Baker Institute for Public Policy, told China Daily.