Consumer prices in the U.S. came in unchanged in the month of December, according to a report released by the Labor Department on Wednesday, with a sharp drop in gasoline prices offsetting higher prices for food and shelter.
The Labor Department said its consumer price index was unchanged in December after falling by 0.3 percent in November. The unchanged reading matched economist estimates.
While the headline index was flat, the energy index showed another notable decline, falling by 1.2 percent in December after tumbling by 4.1 percent in November.
The continued drop in energy prices was largely due to a decrease in gasoline prices, which dropped 2.3 percent in December after plunging by 7.4 percent in the previous month.
On the other hand, food prices rose by 0.2 percent for the third straight month. The Labor Department said five of the six major grocery store food groups increased during the month.
Excluding food and energy prices, the core consumer price index edged up by 0.1 percent for the second consecutive month. The modest increase in core prices also came in line with estimates.The modest increase by the core index was partly due to a 0.1 percent increase in prices for shelter along with higher prices for airline fares, tobacco, and medical care.
Lower prices for recreation, household furnishings and operations, and used cars and trucks helped to limit the upside for the index.
The report also showed that the headline consumer price index for December was up by 1.7 percent compared to the same month a year ago. The number reflects a slowdown compared to the 1.8 percent year-over-year growth in November.
The core consumer price index increased at an annual rate of 1.9 percent in December, unchanged from the year-over-year growth seen in the previous month.
Paul Ashworth, Chief U.S. Economist at Capital Economics, said, “U.S. inflation dipped slightly further below the Fed’s 2% target in December, with the weakness extending well beyond energy prices.”
“Those numbers are in line with the Fed’s forecasts that inflation would remain a little below target, leaving it free to focus on the other half of its dual mandate, reducing the still elevated unemployment rate using more QE,” he added.
Tuesday morning, the Labor Department released a separate report showing that producer prices fell by slightly more than expected in December amid a notable drop in food prices.
The Labor Department said its producer price index dipped by 0.2 percent in December after falling by 0.8 percent in November. Economists had expected the index to edge down by 0.1 percent.
Excluding the drop in food prices as well as a modest decrease in energy prices, the core producer price index inched up by 0.1 percent in December.
The increase by the core producer price index, which matched the increase seen in the previous month, came in below economist estimates for 0.2 percent growth.
Compared to the same month a year ago, the headline producer price index was up by 1.3 percent in December, while the core index saw a 2.0 percent annual rate of growth.
by RTT Staff Writer
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