Where Inflation Is Hitting Hardest: Prices of Groceries, Utilities, Rent Jump

Inflation is broadening out and affecting goods and services that had until now been relatively spared by rising prices, said

Gus Faucher,

chief economist at PNC Financial Services Group.

“Businesses are dealing with higher labor costs, they’re dealing with higher input costs and they’re passing some of those along to their consumers,” he said.

Higher prices will likely push down consumer confidence, Mr. Faucher said, although he added he doesn’t expect it will have much of an effect on consumer spending, which rose an inflation-adjusted 7.9% in 2021 from the previous year, according to the Commerce Department. Rising wages, plentiful jobs and pent-up savings from pandemic-related stimulus programs should prop up spending and overall economic growth, he said.

Below are a few categories that saw significant price changes in January:

Groceries

Groceries rose a seasonally adjusted 1% in January from December, the Labor Department said, well above overall inflation, which stood at 0.6% on the month. Cereal and bakery products were up 1.8% and meats, poultry, fish and eggs rose 0.3%. Meat prices have risen rapidly over the past year and stand 12.2% above where they were a year ago.

Utilities

It is getting harder to pay the power and gas bills. The price of electricity rose 4.2% in January from the previous month, as overall energy prices remained volatile. January’s increase was the biggest monthly rise since 2006. The price of power was up 10.7% in January over the previous year. Household gas prices fell 0.5% in January from December but remain an astonishing 23.9% higher than where they were a year ago.

Housing

Rents ticked up in January, rising 0.5% on the month, the fastest pace since 2001. A measure of housing prices known as owners’ equivalent rents, which represents the price homeowners would pay to rent their own homes, was also up at 0.4% on the month and 4.1% from a year ago.

Higher housing prices tend to show up with a few months’ delay in inflation statistics, which means we could see housing rising further as the year progresses even as inflation in other categories moderates or declines.

Healthcare

Healthcare price inflation was relatively modest throughout the pandemic, as people put off going to the doctor for reasons other than Covid-19 or other emergencies. Now, however, healthcare inflation appears to be creeping up. Medical care services were up 0.6% in January from December, the strongest pace since before the pandemic.

Vehicles

New and used cars and trucks posted some of the steepest price increases since the start of the pandemic, as manufacturers struggled with a surge in demand and a shortage of crucial parts such as computer chips. Inflation for new vehicles was flat in January but remains 12.2% above where it was a year ago. Used car and truck prices rose 1.5% on the month and 40.5% on the year.

Write to David Harrison at [email protected]