US inflation, consumer spending ticks up to end 2024

A shopper pays with a credit card at the South Jordan Parkway Walmart on Saturday, Dec. 7, 2024.

A shopper pays with a credit card at the South Jordan Parkway Walmart on Saturday, Dec. 7, 2024. (Isaac Hale, Deseret News)


Save Story
Leer en español

Estimated read time: 3-4 minutes

KEY TAKEAWAYS
  • The Federal Reserve left the benchmark rate unchanged at their January meeting, taking a wait-and-see approach.
  • Consumer spending surpassed expectations in December, driven largely by the holiday shopping of high income individuals.
  • The share of active credit card accounts making just the minimum payment hit a 12-year high, according to the Federal Reserve Bank of Philadelphia

SALT LAKE CITY — Just two days after the Federal Reserve voted to pause on adjusting its benchmark interest rate, the latest release of the monetary body's preferred inflation metric shows prices on consumer goods and services moved up in December, driven largely by higher energy-related costs.

Friday's Personal Consumption Expenditure index from the U.S. Commerce Department finds prices moved up 0.3% on a monthly basis and 0.2% over the last 12 months to an annual rate of 2.6% in December. Core inflation, which strips out volatile food and energy costs, came in at 2.8% in the final month of 2024, matching the year-over-year rate for the previous two months.

Prices on energy goods and services moved up 2.7% from November to December but were down 1.1% from the same month last year.

The new report finds consumer spending in December shot up 0.7% from the previous month, with a later-than-usual holiday shopping season a likely driver of the jump which outstripped most economists expectations of a 0.5% uptick.

U.S. consumers spent more in December, saved less and pushed more debt to credit cards. The PCE index found consumers saving at a 3.8% rate, down from November's 4.1%.

A report issued by the Federal Reserve Bank of Philadelphia last week warned credit card performance is "showing signs of consumer stress" with the share of active credit card accounts making just the minimum payment hitting a 12-year high, according to the latest data. Analysts at the Philadelphia Fed found the share of revolving card balances to total card balances is continuing its rise since the end of the pandemic. And the share of delinquent balances continues to worsen year over year after surpassing pre-pandemic levels in third quarter 2023.

"It's an orange flag," Gregory Daco, chief economist at EY-Parthenon, told CNN on Friday. "We're noticing that there is a bifurcation in the consumer outlook in that the consumers at the lower-to-medium end of the income spectrum are spending more judiciously in a high-price, high-interest-rate environment."

The strong momentum seen in the consumer spending data has largely been driven by higher income individuals, he said.

What's going on with the Fed?

On Wednesday, the Federal Reserve announced its Open Market Committee voted to leave the monetary body's benchmark rate unchanged at its January meeting, a move that follows three straight rate reductions in the final months of 2024 that lowered the federal funds rate a total of 100 basis points over three adjustments.

The Fed's intra-bank overnight lending rate remains in the 4.25% to 4.5% range.

During a Wednesday press conference, Fed Chairman Jerome Powell said a wait-and-see position was appropriate for the moment, pointing to positive U.S. economic indicators including GDP growth in the 2% to 2.5% range, a relatively stable jobs market and unemployment rate over the past six months and inflation that continues to move, albeit erratically, toward the Fed's 2% goal.

On Friday morning, following the release of the latest PCE data, Fed Governor Michelle Bowman said she expects inflation to decelerate through 2025, but thinks the central bank should stay on hold until there are clear signs that is happening, particularly in light of uncertainty on fiscal policy out of the Trump administration, per a report from CNBC .

"There is still more work to be done to bring inflation closer to our 2% goal. I would like to see progress in lowering inflation resume before we make further adjustments to the target range," Bowman said in remarks before business leaders in Portsmouth, New Hampshire. "I do expect that inflation will begin to decline again and that by year-end it will be lower than where it now stands."

The Key Takeaways for this article were generated with the assistance of large language models and reviewed by our editorial team. The article, itself, is solely human-written.

Most recent U.S. stories

Related topics

U.S.
Art Raymond, Deseret NewsArt Raymond
Art Raymond works with the Deseret News' InDepth news team, focusing on business, technology and the economy.

STAY IN THE KNOW

Get informative articles and interesting stories delivered to your inbox weekly. Subscribe to the KSL.com Trending 5.
By subscribing, you acknowledge and agree to KSL.com's Terms of Use and Privacy Policy.
Newsletter Signup

KSL Weather Forecast

KSL Weather Forecast
Play button