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This is a monthly report from the Bureau of Labor Statistics, which is part of the U.S. Department of Labor. Think of it as the government’s official scorekeeper for tracking how expensive things are getting. Every month, they measure whether prices are going up, going down, or staying the same across the entire economy. This particular report covers December 2025.
Why does the government do this?
Imagine you’re trying to understand whether your family is better off this year than last year. You might notice that your paycheck is bigger, but that doesn’t tell the whole story. If everything costs more now, your bigger paycheck might not actually buy you more stuff. The government faces this same problem when trying to understand the health of the economy. Are people really getting wealthier, or are they just paying more for the same things? This report helps answer that question.
The report measures something called the Consumer Price Index, usually shortened to CPI. You can think of the CPI as a giant shopping cart filled with everything a typical American family buys throughout the year. This cart includes obvious things like groceries, rent, and gasoline, but also things like haircuts, doctors’ visits, college tuition, and streaming services. The government literally sends people out to stores, hospitals, landlords, and service providers across seventy-five cities to record actual prices on about six thousand housing units and twenty-two thousand businesses every single month.
How do we read the numbers?
The report uses a baseline year for comparison. For most items, that baseline is the average prices during 1982 through 1984, which equals one hundred points. When you see a number like 324.054 for the “all items” index in December 2025, that means prices have risen to about 3.2 times what they were in that baseline period. But honestly, that specific number isn’t particularly useful to most of us. What matters much more is the percentage change, which tells us how fast prices are moving right now.
The report gives us two key time frames to think about. First, there’s the month-to-month change, which shows what happened between November and December 2025. Second, there’s the year-over-year change, which compares December 2025 to December 2024. This second number is usually more meaningful because it smooths out temporary bumps and gives you a clearer picture of the trend.
What happened in December 2025?
In December, the overall price level rose by three-tenths of a percent compared to November. Now, three-tenths of a percent might sound tiny, but remember this is just one month. If prices kept rising at that pace every single month for a year, you’d end up with much larger increases. Over the full year from December 2024 to December 2025, prices rose by 2.7 percent.
Let me put that 2.7 percent into concrete terms. Suppose you had one thousand dollars in December 2024 and you just kept it as cash without spending it. By December 2025, the purchasing power of that money would have shrunk. You would need about one thousand and twenty-seven dollars in December 2025 to buy the same amount of stuff that your one thousand dollars could have bought the year before. That twenty-seven dollar difference represents the erosion caused by inflation.
Breaking it down by category
The real insight comes from looking at different types of spending separately, because not everything changes at the same rate. Housing costs, which the report calls “shelter,” went up faster than average at 3.2 percent for the year. This is especially important because Americans spend more on housing than on anything else. For someone paying one thousand five hundred dollars in rent in December 2024, that same apartment would likely cost around one thousand five hundred and forty-eight dollars by December 2025 if it followed this trend.
Food prices increased even more, rising 3.1 percent over the year. But within food, there was enormous variation. Egg prices actually fell dramatically, dropping more than twenty percent over the year. This likely reflects recovery from disease outbreaks in chicken flocks that had previously sent egg prices skyrocketing. Meanwhile, beef prices climbed more than sixteen percent, meaning your steak costs significantly more than it did a year ago.
Energy presents an interesting case. Overall, energy prices rose only 2.3 percent for the year, which is actually less than the general inflation rate. This means energy effectively became cheaper relative to everything else. But again, the details matter. Gasoline prices fell 3.4 percent over the year, saving money for drivers. However, natural gas for heating homes jumped nearly eleven percent, hitting families in colder climates particularly hard during winter months.
What about wages?
Here’s where the rubber meets the road for most families. This report only tells us about prices, not incomes. To understand whether people are actually better off or worse off, you need to compare these price increases to wage increases. If your income went up by four percent over the year while prices rose 2.7 percent, you came out ahead. You have more purchasing power. But if your income only increased by one percent, or if you’re on a fixed income like Social Security that didn’t keep pace, then you’re effectively poorer because your money buys less than it did before.
This is why inflation matters so intensely in political debates and why the Federal Reserve pays such close attention to these numbers. The Fed generally aims to keep inflation around two percent per year, viewing that as a healthy rate that encourages spending and investment without eroding purchasing power too quickly. At 2.7 percent, we’re moderately above that target, which might concern policymakers.
Some technical details worth understanding
The report mentions something called “seasonally adjusted” figures. This is important because prices naturally fluctuate at certain times of year for reasons that have nothing to do with underlying inflation. For example, hotel prices surge in summer because of vacation travel, and they spike again during holidays. Fresh produce gets cheaper when it’s in season and more expensive when it’s not. To see the real trend, statisticians use mathematical techniques to remove these predictable seasonal patterns. That’s why the report shows both adjusted and unadjusted numbers.
There’s also something called “core inflation,” which strips out food and energy prices entirely. Why would they do that? Because food and energy prices can swing wildly from month to month due to weather, geopolitics, or other temporary factors. By removing these volatile categories, economists can better see the underlying momentum of inflation. In December, core inflation was running at 2.6 percent annually, just slightly below the overall rate.
A significant gap in the data
You’ll notice the report repeatedly mentions that October and November 2025 data are missing due to a “lapse in appropriations.” In plain English, this means the government shut down during those months, and the Bureau of Labor Statistics couldn’t collect price data. This creates a blind spot in our understanding of price trends during that ten-week period. It’s like trying to understand the plot of a movie when someone fast-forwarded through an important scene.
What does this tell us about the economy?
An inflation rate of 2.7 percent suggests an economy that’s neither in crisis nor perfectly stable. It’s elevated enough to concern people, especially those on fixed incomes or whose wages aren’t keeping pace. But it’s nowhere near the painful inflation of 2021 and 2022, when annual rates exceeded seven percent and some months saw prices jumping by nearly a full percent in just thirty days.
The fact that the annual rate held steady at 2.7 percent for both November and December suggests that inflation might be stabilizing at this level rather than continuing to accelerate or decelerate. Whether that’s good news or bad news depends on your perspective and situation. For policymakers, it means their efforts to control inflation without triggering a recession might be working, though they’d prefer to see the rate closer to two percent.