Inflation Trends and the RCF Inflation Scorecard – December 2023

Progress is Not Victory

Peter Bernstein, Chief, 312-431-1540 x1515

The Current Situation

2023 inflation, measured December to December, was 3.4%, a substantial decline from the 6.5% inflation rate for the 12 months ending in December 2022.  But 3.4% inflation is still notably above the Fed’s 2% target and the December monthly data confirm our view that the “last mile” of the inflation battle may be the most difficult.  Prices rose 0.3% in December, a reversal from the smaller increases in October and November.  Core prices also rose 0.3% in December, which did result in a small decline in 12-month core inflation to 3.9%.  

Figure showing year-on-year rate of CPI and Core CPI by month from June 2020.

What is most disturbing about the December data is that it wasn’t a case of one or two CPI components driving the price increases.  Instead – as our Scorecard will detail – most of the CPI components are settling into an inflation rate that, while lower than before, is still higher than desired.  Rent and owner’s equivalent rent inflation have slowed, but price increases in the non-shelter components of the CPI have risen, leaving the overall inflation rate more or less the same for the past several months. 

2023 was in most ways a good year.  Instead of a recession, the economy grew solidly, 2.7 million jobs were added, and wages rose faster than prices.  Looking ahead, the question is whether we can reach that last-mile in the inflation battle while still maintaining the positives from the past year.

RCF’s Inflation Scorecard

RCF’s Inflation Scorecard is based on analysis of 20 different price series comprising 98% of the total consumer price index.  Each of these price series represents a portion of the CPI based on household spending patterns.  For example, food purchased for at-home consumption is about 8.7% of the typical consumer’s budget; it has a weight of 8.73 out of a total index of 100. 

Our scorecard presents two metrics to track month-to-month price increases.  The first metric is the share of the index for which inflation in the most recent month is rising (greater than the prior month’s inflation) vs. the share of the index for which inflation is falling (lower than the prior month) or prices fell (deflation).  Because deflation is showing up across more categories, we’ve added a separate measure of the total weight of deflation within the CPI index. 

Our second metric is the share of the index for which the most recent month’s inflation exceeded 0.2%, a monthly rate that corresponds to the Federal Reserve’s target inflation rate of 2% per year.   

RCF Inflation Scorecard: December 2023

Figure showing what share of items have rising or falling inflation, by month

For the first metric, the big story is that nearly half of the weighted CPI had stable inflation in December vs. November.  If inflation was already low that would be good news.  But with inflation still running above 3%, stability is not good.  26% of the weighted CPI had rising inflation which is one of the best readings for this measure during 2023.  Another 30% had either falling inflation or deflation.

Our second metric showed that 67% of the weighted CPI had monthly inflation above 0.2%.  That is the highest share since February 2023.  Together, the Scorecard shows an economy with inflation that is lower than it was but also more stable, with few components of the index showing rising inflation, but most components showing inflation above the Fed’s target. 

Analysis of Individual Components of the Consumer Price Index 

Sources: Bureau of Labor Statistics and RCF Calculations 1. Inflation direction indicates whether monthly inflation in December was higher or lower than monthly inflation in November.  Deflation means prices fell in December vs. November.


  • Food-at-home prices were up just 0.1% in December and 1.3% year-over-year, a huge improvement from the double-digit inflation rates for this category during 2022. The price of Food-away-from home, on the other hand, increased 5.2% during 2023.  
  • Rents rose 0.4% in December.  There hasn’t been a lower monthly increase in rents since 2021.  Year-over-year rent was up 6.5% and homeowner’s equivalent rent was up 6.3%.  While both of these are still twice the overall rate of inflation, they were also the lowest year-over-year increases since mid-2022. 
  • New vehicle prices rose 1.0% in 2023 while Used car and truck prices have fallen 1.3% since last December.  Motor fuel prices are also down from a year ago.  But the good news for drivers ends there.  Vehicle repair costs were up 7% in 2023 and vehicle insurance prices rose a whopping 20%!  
  • Although we are troubled by the persistence of above 2% inflation, let’s not lose sight of how much lower inflation was in 2023 compared to 2022.  Not shown in the chart above, but useful as a year vs year measure, 18 of our 20 CPI components had lower inflation or deflation in 2023 compared to 2022
  • More good news is that 7 of the 20 components, representing 24% of the weighted CPI, had prices in December that were lower than their all-time highs.  While it may seem that prices only move in one direction, sometimes things really to get cheaper.