Inside the Consumer Price Index: December 2025

• Energy costs (6.2% of expenditures) are distributed across Housing and Transportation rather than tracked as a standalone category, with high volatility significantly impacting the Transportation index
• Core inflation (excluding food and energy) stands at 2.64% annualized versus 2.68% for headline CPI, with cumulative growth since 2000 of 85.5% and 92.5% respectively
• Lower-income households, those on fixed incomes, and families with high tuition, transportation, or medical expenses face disproportionate inflation pain, while BLS college tuition calculations may overstate costs by ignoring financial aid

Summary: Inside the Consumer Price Index - December 2025

The Bureau of Labor Statistics divides consumer expenditures into eight categories, with food, shelter, and clothing comprising over 60% of the CPI-U index. Energy, weighted at 6.216% (3.0% transportation fuels, 3.2% household energy), is distributed across housing and transportation rather than tracked as a standalone category.

Key Findings Since 2000:

• Medical Care and Housing have grown over 100%, leading all categories
• Food and Beverages exceeded 100% growth, driven largely by post-pandemic price spikes
• Apparel remains virtually unchanged since 2000, occasionally experiencing deflation
• College tuition and fees surged nearly 200%, though BLS calculations use sticker prices rather than actual costs after financial aid
• Transportation shows high volatility, primarily due to motor fuel price fluctuations

Current Inflation Metrics (December 2025):

• Headline CPI annualized rate: 2.68%
• Core CPI (excluding food and energy) annualized rate: 2.64%
• Cumulative CPI change since 2000: 92.5%
• Cumulative Core CPI change since 2000: 85.5%

Market Implications:

The analysis highlights significant disparities in inflation's impact across households. Lower-income families, those on fixed incomes, and households with high expenses in tuition, transportation, or medical care face disproportionate burdens. Suburban commuters experience greater pain from fuel price increases compared to urban residents or remote workers.

Notably, Core Inflation—the Federal Reserve's preferred metric—excludes food and energy but includes alcoholic beverages, potentially understating real consumer cost pressures. The cumulative inflation perspective reveals substantial erosion in purchasing power over the past 25 years, particularly affecting discretionary spending for budget-constrained households.