Rising Prices: Which Goods and Services Are Driving Inflation?

Higher prices for housing and transportation contributed to hotter-than-expected inflation in January.

inflation rising prices
(Image credit: Getty Images)

Inflation accelerated in January, exceeding economists' expectations in just about every way the Consumer Price Index measures it.

Headline inflation rose 0.3% last month, the Bureau of Labor Statistics said Tuesday, while economists were looking for a 0.2% rise in the index. On an annual basis, headline inflation increased 3.1% vs expectations for 2.9%.

Core CPI, which strips out volatile food and energy costs, accelerated 0.4% last month vs a forecast for a 0.3% gain. For the trailing 12 months, core CPI rose 3.9% vs expectations for 3.7%.

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"January's CPI clearly throws a bucket of cold water on the disinflation narrative," says Brad Conger, deputy chief investment officer at Hirtle Callaghan & Co. "Shelter should not have turned around based on the leading trend of alternative rent data. Second, disinflation failed to 'broaden' as a number of core services showed an instantaneous re-acceleration."

The bottom line from January's inflation reading is that prices are still rising at rates not seen in generations.

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 falling out of bag with red arrow going higher

(Image credit: Getty Images)

Shelter or housing, which accounts for about two-thirds of the CPI weighting and moves with a lag, was largely to blame for the nasty upside inflation surprise. No surprise there. The sundry costs for keeping a roof over one's head, accelerated to 0.6% last month from 0.4% in December. Year-over-year, shelter costs popped 6.0%.

True, home prices and rents have been in a downtrend since the middle of 2022, but higher owners' equivalent rent and the fact that the data are backward looking are just a couple of reasons for this CPI component remaining elevated.

Then there's food, prices of which rose 0.4% in January, or up from the 0.2% rates seen the previous two months. On an annual basis, food inflation rose 2.6% last month, fueled by 0.4% increases for both food at home and food away from home.

Drilling down a bit, four of the six major grocery store food group indexes increased over the month, the BLS said. The index for nonalcoholic beverages rose 3.4%, while cereals and bakery products increased 1.5%. Elsewhere, the fruits and vegetables index rose 1.1% over the 12 months ended January.

Transportation did consumers no favors last month either. Costs rose 1% in January after ticking up just 0.1% a month earlier. On an annual basis, transportation is 9.5% more expensive than it was a year ago. 

In better news, buyers of new vehicles and used cars and trucks caught a break in January. Prices for the former were unchanged last month, while prices for used cars declined 3.4% in January. 

The bottom line is that on an annual basis, inflation last month was primarily driven by higher costs for shelter, food and transportation. But consumers saw higher prices in sundry other areas. Hospital services prices jumped a surprising 1.6%, airfares rose 1.4% and lodging costs rose 1.8%. 

Although these upward price pressures continue to show signs of easing, experts stress the fight against inflation is far from over.

"Data trends typically are non-linear," The Wealth Alliance's Conzo of says. "Although this data is hotter than expected, the overall trend is that inflation has been decreasing and it is expected to continue."

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Dan Burrows
Senior Investing Writer, Kiplinger.com

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.