Rising Prices: Which Goods and Services Are Driving Inflation?
Inflation picked up to start the new year, fueled by rising costs for housing, food and other items.

U.S. consumer price inflation took a surprising turn for the worse in January, as the Consumer Price Index (CPI) showed price increases for a broad range of goods and services.
For the record, headline January CPI increased 0.5% month over month, according to the Bureau of Labor Statistics, or the biggest gain since August 2023. Economists were looking for inflation to rise 0.4% last month. On an annual basis, headline CPI rose 3%, up from 2.9% in December, and higher than the 2.9% median forecast.
More importantly, core CPI, which excludes volatile food and energy costs and is considered a better indicator of future prices, increased 0.4%, an acceleration from 0.2% last month. Economists were looking for monthly core CPI to increase 0.3%.

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On an annual basis, core CPI also came in hot, at 3.3% vs the median estimate of 3.1%.
"Notably, items that are closely watched by consumers saw an acceleration in price increases," writes David Royal, chief financial and investment officer at Thrivent.
The bottom line from the January CPI report is that prices are still rising faster than consumers would like.
Between 2000 and 2020, annual inflation in the U.S. averaged just 2.1%. (Recall that the Federal Reserve's inflation target is 2%.) Perhaps we didn't appreciate it enough at the time, but the first two decades of the 21st century were a sort of Goldilocks era for inflation: not too fast and not too slow.
Just have a look at some of the subcategories in the latest CPI report to see how much things have changed. Below we highlight the goods and services that are weighing most heavily on folks' finances.
Rising prices: where inflation is hitting hardest
Groceries, which had seen moderating inflation in the first half of 2024, were up significantly, Thrivent's Royal notes. Indeed, the food category increased 0.4% last month after rising 0.3% in December. The food away from home category, which includes meals at restaurants and bars, rose 0.5% in January after gaining 0.3% at the end of 2024.
Meanwhile, used car prices, which had shown price declines in mid-2024, were up 2.2% in January, Royal adds.
Medicine and medical devices also got pricier last month, as medical care commodities rose 1.2%, breaking a five-month streak of easing.
Other large contributors to inflation were services, especially services excluding energy services, which increased 0.5% last month after rising 0.3% in December. Commodities also chipped in. Excluding food and energy, the index gained 0.3% after being flat a month ago.
Housing costs, or the shelter index, also remained sticky and contributed to inflation last month.
"The shelter index increased 0.4% over the month," the BLS said. "The index for owners' equivalent rent rose 0.3% in January, as did the index for rent. The lodging away from home index increased 1.4% in January."
Elsewhere, prices for motor vehicle insurance index rose 2% in January, while the index for recreation rose 1%. Communication, airline fares and education also increased in January.
In better news, the index for apparel fell 1.4% last month, while prices for personal care and household furnishings and operations also declined over the month.
Where inflation goes from here is hard to say as forecasters brace for the potential impact of tariffs under the new administration in Washington, D.C.
"Core inflation, a strong predictor of future headline prices, remained stuck between 3.2 % and 3.3% for the last seven months, indicating that reaching the target remain difficult," writes Dawit Kebede, senior economist at America's Credit Unions. "This report, combined with a still-solid labor market, supports the case for the Federal Reserve to maintain interest rates."
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Dan Burrows is Kiplinger's senior investing writer, having joined the august publication full time in 2016.
A long-time financial journalist, Dan is a veteran of SmartMoney, MarketWatch, CBS MoneyWatch, InvestorPlace and DailyFinance. He has written for The Wall Street Journal, Bloomberg, Consumer Reports, Senior Executive and Boston magazine, and his stories have appeared in the New York Daily News, the San Jose Mercury News and Investor's Business Daily, among other publications. As a senior writer at AOL's DailyFinance, Dan reported market news from the floor of the New York Stock Exchange and hosted a weekly video segment on equities.
Once upon a time – before his days as a financial reporter and assistant financial editor at legendary fashion trade paper Women's Wear Daily – Dan worked for Spy magazine, scribbled away at Time Inc. and contributed to Maxim magazine back when lad mags were a thing. He's also written for Esquire magazine's Dubious Achievements Awards.
In his current role at Kiplinger, Dan writes about equities, fixed income, currencies, commodities, funds, macroeconomics, demographics, real estate, cost of living indexes and more.
Dan holds a bachelor's degree from Oberlin College and a master's degree from Columbia University.
Disclosure: Dan does not trade stocks or other securities. Rather, he dollar-cost averages into cheap funds and index funds and holds them forever in tax-advantaged accounts.
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