Rising consumer prices provide further support for central bank policymakers' median expectation of three increases this year in the Fed's benchmark interest rate, which now is at a range of between 1.25 percent and 1.5 percent.
The December core CPI reading was also stronger than the 0.2 percent rise forecast among analysts polled by Reuters.
PHD Chamber's President Anil Khaitan said that as the "teething problem of GST" have been nearly over, the growth in industry has come with a strong rebound and "we look forward the growth to become more strong in the coming quarters". The measure excluding food and energy is also below their target.
The dollar trimmed losses against a basket of currencies after the data. A 0.4% rise in shelter costs from the prior month accounted for much of December's uptick.
"The outsized core is due to a 1.4% jump in used auto prices - demand rocketed after the hurricanes in the summer, driving up auction prices", said Ian Shepherdson at Pantheon Macroeconomics. The cost of both hospital and doctor visits increased 0.3 percent. Amid talk of whether a bear market in bonds is nigh, a resurgence in the consumer-price index would add to the growing feeling that the 10-year Treasury yield will finally break higher in 2018, after doing little last year.
The cost of motor vehicle insurance increased 0.6%.
"At a very minimum, one can say that core CPI has convincingly stopped declining and is holding firm only a little beneath the Fed's 2 per cent inflation target", said Derek Holt, chief economist at Scotiabank.
Capital goods output, a proxy for investment, grew by 9.4 per cent in November as against 5.3 per cent a year ago.
But apparel prices fell for the fourth consecutive month, and airline fares fell 0.5 percent after a 2.4 percent drop in November.
However, the consumer price inflation is expected to come in at 3.6 percent in FY2018 and it is likely to average 5.1 percent in FY2019. Owners' equivalent rent of primary residence climbed 0.3% after gaining 0.2% in November.
Excluding automobiles, gasoline, building materials and food services, retail sales increased 0.3 per cent last month after an upwardly revised 1.4 per cent surge in November. It increased 1.8 per cent in the 12 months through December, picking up from 1.7 per cent in November. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.
For the full year, CPI rose 2.1 percent, the same as 2016, while core CPI slowed, posting a 1.8 percent increase after the 2.2 gain in the previous year. Consumer spending, which accounts for more than two-thirds of US economic activity, increased at a 2.2 percent annualized rate in the third quarter.