WASHINGTON – U.S. consumer prices fell in December by the largest amount in six years, reflecting another big monthly decline in gasoline prices and providing further evidence of falling inflation pressures.
The Labor Department said Friday that its consumer price index dropped 0.4 percent last month, the biggest one-month drop since December 2008. It was also the second straight monthly decline in prices with both months reflecting big decreases in gasoline prices, which have been tumbling in recent months because of the global plunge in oil prices.
Core inflation, which excludes volatile food and energy, showed no increase in December, only the second time since 2010 that core prices have not risen.
“There is little inflation pressure in the United States or almost anywhere else for that matter,” said Jennifer Lee, senior economist at BMO Capita Markets.
For all of 2014, overall inflation was up just 0.8 percent, the smallest annual increase since 2008.
The 0.8 percent rise in prices for the year compared to a 1.5 percent increase in 2013 and a 1.7 percent increase in 2012. It was the smallest advance since prices edged up just 0.1 percent in 2008, the year the Great Recession threw the economy into reverse.
In addition to plunging global oil prices, the dollar has been rising against other major currencies. That makes foreign-produced goods cheaper for U.S. consumers.
In December, gasoline prices fell 9.4 percent, the sixth consecutive monthly decline and the biggest drop since December 2008. The string of declines has left gasoline 19.1 percent lower than a year ago. Food prices edged up 0.3 percent in December and are 3.4 percent higher than a year ago. Some of the gains this year reflect drought conditions in California and other states.
Oil, which had been trading for more than $100 per barrel last summer is now going for less than half that. The big plunge has lowered prices at the pump to a nationwide average of $2.09, according to AAA, down from $2.55 a gallon just one month ago and $3.31 a year ago.
Even before the big plunge in oil prices, inflation has been running levels well below the 2 percent that the Federal Reserve sees as an optimal annual increase for prices. That has given the Fed leeway to keep a key interest rate at a record low to boost economic growth.
The Fed in December said that it intended to be “patient” about raising interest rates, supporting the view among many economists that the first rate increase will not occur until June at the earliest.
That view is not unanimous however. Other analysts point to strong job gains that pushed unemployment down to 5.6 percent in December, close to the Fed’s 5.2 percent to 5.5 percent target.
