How Inflation In NJ Compares To 6.5% U.S. Rate

NEW JERSEY — Inflation cooled again in December, bolstering hopes the Federal Reserve will do the same with interest-rate hikes that have increased borrowing costs. But consumer prices In New Jersey and around the nation — especially on food and energy — remain significantly higher than one year prior.

Nationally, consumer prices were 6.5 percent higher last month than they were in December 2021. In the Northeast region, which includes New Jersey, the year-over-year inflation rate was 6.1 percent.

The Consumer Price Index (CPI) measures the average change over time in the prices consumers pay on items such as groceries, gas and transportation. The metric represents a key way to measure inflation over time.

December marked the sixth straight year-over-year slowdown in the consumer price index, according to the new inflation report released Thursday by the Bureau of Labor Statistics. On a monthly basis, prices slipped 0.1 percent from November to December, the first such drop since May 2020.

Lower fuel costs helped drive inflation in the right direction. The national average for a gallon of gas declined from a $5-a-gallon peak in June to $3.29 a gallon Friday, according to AAA. In New Jersey, the average price for a gallon of gas is $3.27.

However, experts warned that low supply and high demand — both sparked by last December's winter storm — could drive gas prices back up before they gradually increase during the coming months. The major storm caused refineries to temporarily shut down, while the weather prompted holiday travelers to hit the road early.

GasBuddy's 2023 Fuel Price Outlook, released Dec. 28, predicts that the national-average cost per gallon will reduce from $3.04 in January to $2.99 in February. Costs will then gradually rise each month, peaking at $3.99 in June before a steady decline to $3.49 in December. The outlook predicts that the daily-average gas price this year will peak at $4.50-$4.95 in New York City and $4.45-$4.95 in Philadelphia.

• Read more: NJ Gas Near $5 Again? Experts Forecast Fuel Prices In 2023

Meanwhile, energy and grocery costs around the U.S. remain stubbornly high. All energy costs saw a 7.3 percent year-over-year increase. Natural gas and electricity costs soared 19.3 percent and 14.3 percent, respectively.

The softer readings in the report add to growing signs that the worst inflation in about 40 years is gradually waning. Still, the Fed doesn’t expect inflation to slow enough to get close to its 2 percent target until well into 2024. The central bank is expected to raise its benchmark rate by at least a quarter-point when it next meets at the end of this month.

Here were the price changes on key purchases in the Northeast last month:

• Groceries: up 10.8 percent from December 2021, up 0.2 percent from November.
• Shelter: up 5.1 percent from December 2021, up 0.8 percent from November.
• Fuels and utilities: up 21.8 percent from December 2021, down 0.7 percent from November.
• Energy services: up 22.5 percent from December 2021, up 2.6 percent from November.
• Transportation: up 5.3 percent from December 2021, down 1.4 percent from November.
• Medical care: up 4.2 percent from December 2021, down 0.2 percent from November.

Last week’s jobs report for December bolstered the possibility that a recession could be avoided. Even as the central bank has jacked up its benchmark rate at the fastest pace in four decades and inflation remained high, the economy has kept growing and businesses have kept hiring. In December, employers added a solid 223,000 jobs, and the unemployment rate dropped back to 3.5 percent, matching a 53-year low.

At the same time, average hourly pay growth slowed, which should lessen pressure on companies to raise prices to cover their higher labor costs.

Another positive sign for the Fed’s efforts to quell inflation is that Americans overall expect price increases to decline over the next few years. That is important because so-called “inflation expectations” can be self-fulfilling: If people expect prices to keep rising sharply, they will typically take steps, like demanding higher pay, that can perpetuate high inflation.

On Monday, the Federal Reserve Bank of New York said that consumers now anticipate inflation of 5 percent over the next year.

That’s the lowest such expectation in nearly 18 months. Over the next five years, consumers expect inflation to average 2.4 percent, only barely above the Fed’s 2 percent target.

Still, in their remarks in recent weeks, Fed officials have underscored their intent to raise their benchmark short-term rate by an additional three-quarters of a point in the coming months to just above 5 percent. Such increases would come on top of seven hikes last year, which led mortgage rates to nearly double and made auto loans and business borrowing more expensive.

The Associated Press contributed reporting.