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Economic Forecasts

Inflation Headed Up

Kiplinger's latest forecast on inflation

GDP 1.5% growth for the year; a 2.1% pace in '17 More »
Jobs Hiring at 150K-200K/month through '16 More »
Interest rates 10-year T-notes at 2.7% by end '17 More »
Inflation 2.0% for '16, 2.4% in '17 More »
Business spending Slight gain in '17 after flat '16 More »
Energy Crude oil trading from $50 to $55 per barrel in March More »
Housing Single-family starts up 9% in '16, 11% in '17 More »
Retail sales Growing 3.7% in '17 (excluding gas) More »
Trade deficit Widening 4% in '17, matching increase in '16 More »

Look for small increases in energy prices to boost overall inflation to 2.4% at the end of 2017, from 2% at the close of this year.

Core inflation, which excludes food and energy, will also end 2017 at 2.4%, up a bit from the 2.2% rate we expect this year. The modest pickup in the core inflation rate, spurred in part by wage increases, will likely prod the Federal Reserve to raise interest rates by a quarter of a percentage point once or twice next year.

See Also: All Our Economic Outlooks

Prices of groceries will decline a bit next year but the price of dining out will rise. Greater competition in the grocery business next year, along with lower prices for imported food, will tamp down what you shell out at the supermarket, while restaurant prices will rise at the rate of inflation and perhaps exceed it a bit. Restaurant costs are determined more by the cost of labor than of food. And worker wages will rise faster in 2017 than they have recently, as the labor market in general tightens.

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Health care costs are going to go up — again. Cost pressures are ramping up in this sector, particularly for hospitals. Health insurance costs will rise by 4% to 6% for employer plans, and by up to 9% for the Obamacare exchange plans. Prescription-drug price inflation will ease from its 7% rate, but only because many price increases have already taken place.

The cost of keeping a roof over your head will rise 3.7% in 2017, up from 3.5% in 2016. Shortages of homes for sale in many metro areas will keep upward pressure on rents. Also rising again next year: The prices of college textbooks, up another 5% to 7%.

SEE ALSO: Print-Ready Consumer Price Index Chart

Source: Department of Labor, Inflation Data