Consumer prices post largest gain in six months

WASHINGTON Thu Jan 16, 2014 8:36am EST

Prices are seen on replica Statues of Liberty figures in a shop window in New York City, November 14, 2011. REUTERS/Mike Segar

Prices are seen on replica Statues of Liberty figures in a shop window in New York City, November 14, 2011.

Credit: Reuters/Mike Segar

WASHINGTON (Reuters) - U.S. consumer prices recorded their largest increase in six months in December as gasoline prices rebounded, but there was little to suggest a broader pick-up in prices with underlying inflation muted.

The Labor Department said on Thursday its Consumer Price Index increased 0.3 percent after being flat in November. In the 12 months to December, consumer prices accelerated 1.5 percent after advancing 1.2 percent in November.

The increases were in line with economists' expectations.

Stripping out the volatile energy and food components, the so-called core CPI rose only 0.1 percent, slowing from a 0.2 percent gain in November.

That left its increase over the past 12 months at 1.7 percent, where it has now been for four consecutive months.

The Fed targets 2 percent inflation, although it tracks a gauge that tends to run a bit below CPI.

The U.S. central bank has started reducing the pace of its monthly bond purchases, but persistently low inflation is expected to see it hold interest rates near zero for a long time even if the jobs market picks up significantly.

Slack in the jobs market, which has seen small gains in wages, is keeping the lid on inflation. Even as the economy accelerates, wage growth is expected to lag, meaning inflation will only gradually increase this year.

A 3.1 percent increase in gasoline prices was mostly behind the spike in inflation last month. The increase in gasoline was the largest since June and followed a 1.6 percent fall in November. Food prices nudged up 0.1 percent, rising by the same margin for a third month.

Within the core CPI, apparel prices rose 0.9 percent, also the largest gain since June. Apparel prices had declined for three consecutive months.

There were increases in rents. While medical care costs rose 0.3 percent, prices for prescription drugs fell 0.9 percent. Tobacco prices rose, maintaining the trend seen in wholesale prices.

New motor vehicle prices were flat, while prices for used cars and trucks fell.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

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Comments (1)
Seems to me, they used to strip out the energy portion already. When exactly did they begin stripping out the “volatile” food prices? Or is the economists’ game just to strip out whatever components are rising fastest on a long-term basis when considering inflation? Seeing as how people cannot live without food, doesn’t that defeat the purpose of the whole exercise in very real terms?

To put it plainly most, if not all, food items have easily risen 100% (at least) over the past 6 years, while real incomes have remained flat or declined. If real incomes and nominal incomes are, for the most part, declining on average, what is the inflation rate then? There’s no one magic formula that applies, true, but ignoring factors doesn’t help either.

As “economists”, they have the luxury of ignoring such facts as energy and food. In the real world, people do not. Jobless rates down also may mean that companies have reached their minimum staffing levels and are reluctant to fire more. That does not translate into a positive outlook on hiring, let alone wage increases. That does not translate to an improvement in the job market.

We are pretty much stagnant and playing musical chairs with money internally (the stock market, bond market gains and losses).

Jan 16, 2014 5:42pm EST  --  Report as abuse
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