Please enable JavaScript to view the comments powered by Disqus.

Economic Forecasts

Inflation Will Pick Up Next Year

Kiplinger's latest forecast on inflation

GDP 1.4% growth for the year; a 2% pace in '17 More »
Jobs Hiring at 150K-200K/month through '16 More »
Interest rates 10-year T-notes at 1.4% by end '16 More »
Inflation 1.7% for '16, 2.4% in '17 More »
Business spending Flat in '16, slight gain in '17 More »
Energy Crude oil trading from $40 to $45 per barrel in Dec. More »
Housing Prices up 5% in '16, 6% in '17 nationally More »
Retail sales Growing 3.4% in '16 and '17 (excluding gas) More »
Trade deficit Widening 4% in '16, after a 6.2% increase in '15 More »

Look for consumer price inflation to increase next year, fueled by small increases in energy prices that will boost the rate to 2.4% at the end of 2017, from 1.7% at the close of this year.

Core inflation, which excludes food and energy, will also end 2017 at 2.4%, up just a tick from the 2.3% rate we expect this year.

The small but steady upward trend in the core inflation rate will likely help spur the Federal Reserve to raise interest rates by a quarter of a percentage point a couple of times next year.

See Also: All Our Economic Outlooks

Advertisement

Medical care prices in 2017 will continue to rise strongly, matching the 2016 pickup of 4.9%. Cost pressures have ramped up in this sector, particularly for hospitals. Health insurance costs will rise by 4% to 6% for employer plans, and up to 9% for the Obamacare exchange plans. Prescription drug price inflation will ease slightly from its 6% rate, but only because many increases have already taken place.

Prices for shelter will rise 3.7% in 2017, up from a 3.5% rate in 2016. Shortages of homes for sale in many metro areas will keep upward pressure on rents. Prices of college textbooks will also continue their long habit of rising 5% to 7% each year.

Expect food prices to rise only modestly in 2017, a tad more than 2016’s rise of 0.2%. The relatively strong value of the U.S. dollar versus other key currencies continues to hold down the costs of imported food. However, restaurant prices will rise close to 3% as establishments raise wages to attract increasingly scarce servers and cooks.

SEE ALSO: Print-Ready Consumer Price Index Chart

Source: Department of Labor, Inflation Data