December CPI data revealed that consumer prices were higher than expected, with shelter prices accounting for more than half of the price increases. Food inflation rose, with groceries up 1.3% year-over-year and food at restaurants up 5.2% over the same time period. Meanwhile, used vehicles prices decreased year-over-year by 1.3%. Yahoo Finance's Josh Schafer, Pras Subramanian, and Brooke DiPalma break down the latest with the report and give insight into impact of these numbers.

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Editor's note: This article was written by Nicholas Jacobino

Video Transcript

BRAD SMITH: December CPI reports showed prices were higher than expected. We saw prices rise 3.4% year-over-year compared to 3.2%. That was the expectation. And 3.1% was last month's reading. The energy index driving a lot of those gains. Also, that volatile core inflation that excludes food and energy came in at 3.9% year-over-year. We've got you covered with the three biggest takeaways from the report, housing, food, and car prices. Josh Schafer, Pras Subramanian, and Brooke DiPalma are standing by. Hey, Josh. Shelter still the lead gainer in that CPI print.

JOSH SCHAFER: Yeah, Brad. So shelter accounting for more than half of the price increases that we saw in December. That's according to the Bureau of Labor Statistics. So I want to give you those numbers here and run through them for what we saw in December. Shelter inflation.

When you take a look at that shelter inflation, you're looking at rent month-over-month increasing 0.4%, year-over-year increasing 6.5%. And then when you look at homeowners rent equivalent, that went up 0.5% month-over-month and 6.3% year-over-year. Really not much of a decline from the price increases that we saw in November.

We know overall, housing has been a key part of this story and is one of the main things that's still holding up inflation and providing significant upside risk to inflation. Now, of course, economists would point to some of this data in the BLS is a little bit lagging, and there's other rent inflation data that you could look to that says the grass might be greener on the other side in the long term.

But for today, this is the report that we have. And the shelter index is contributing a significant amount to that hotter-than-expected number, which for now, markets don't seem to love. Of course, we're always wondering what that could mean for more Fed rate hikes. Pras Subramanian, though, is standing by in the newsroom with more on auto prices. Pras, what do you got for us?

PRAS SUBRAMANIAN: Hey, Josh. Yeah, continued moderation in auto prices is the theme here. Let's look at new cars. In December, prices rose 3/10 of a percent, but only rose 1% year-over-year, a big drop compared to last year's nearly 6% jump as disinflation hits the sector. Turning over to the used market, prices climbed 1/2% for the month, a trend we've been seeing as the market reaches some stability after falling considerably.

And we see that in the year-over-year figure with these prices falling 1.3% after they fell nearly 9% in 2022. We're seeing the same type of trend in the used wholesale market or auction market with the Manheim index dropping 7% in 2023 as well. Brooke DiPalma is a touch screen. Brooke, are grocery prices coming down at all?

BROOKE DIPALMA: Not yet price. Good morning. Food inflation continues to moderate, but the cost of food in the month of December was still up 2.7% compared to last year. Now, groceries in particular jumped 1.3% year-over-year and up 0.1% in the month of December. Now, the cost of dining out jumped even higher, up 5.2% compared to last year and up 0.3% month-over-month.

Now, this will be something to watch in 2024 as restaurants look to bring in customers and increase foot traffic even with these higher prices, which are being used to offset higher labor and food costs. Now, taking a closer look at some key items that saw the biggest month-over-month jump includes uncooked beef steaks, ham, fish, and seafood.

And remember that top egg producer here in the US, Cal-Maine Foods? Well, they reported a case of the bird flu and shut down their Kansas production facility. And we're already seeing the impact there. Egg prices jumped 8.9% month-over-month after we saw some moderation at the end of last year. Seana, Brad, back to you.