HomeInflation2008 inflation rate at 0.1%, slowest gain in 54 years for consumer...

2008 inflation rate at 0.1%, slowest gain in 54 years for consumer prices

The annual rate of U.S. inflation plunged to 0.1% in 2008, with consumer prices driven down by falling energy prices. The cost of living dropped for Americans as prices dipped for the third straight month, and showed the slowest 12-month gain since 1954, the Labor Department reported Friday.

The Consumer Price Index (CPI), the most closely watched gauge for inflation, fell by 0.7% in December after dropping 1.7% in November. Economists had expected the number to come in at 0.8%.

"Overall inflation has already declined significantly and appears likely to moderate further," Fed Chairman Ben S. Bernanke said in a Jan. 13 speech in London that was reported on Bloomberg.com.

"At this point, with global economic activity weak and commodity prices at low levels, we see little risk of inflation in the near term."

Plummeting energy prices was the headliner again. The energy index fell 8.3% and led in the CPI’s decline by accounting for almost 90 percent of the decrease in the all items index.

A world mired in sluggish economies has resulted in severely depressed commodity prices, like crude-oil, which peaked to $147 a barrel last July when inflation registered a 17-year high. Inflation is no longer a worry, but deflation may be.

"Deflation is just around the corner," said Meny Grauman, an economist at CIBC World Markets in Toronto and reported on Reuters.

"With the U.S. economy roughly one full year into a deep recession, the prospect of deflation is a concern for another time, especially on a day when the U.S. government has decided to inject billions more into the U.S. banking system."

More economists are now focusing in on the dangers of continual, out of control falling prices, known as deflation.

December consumer price figures up close

The core CPI, which excludes volatile food and energy prices, was unchanged for the second consecutive month. Core inflation rose 1.8% on a 12-month basis, which is within the Federal Reserve’s comfort zone of between 1%-2%

The report on Friday had some good news consumers have already felt.

  • Gasoline prices tumbled 17.2%, compared to November’s 29.5% decline
  • Fuel oil prices dropped 13%
  • Food prices fell 0.1%
  • Clothing was down 0.9% after rising 0.3% in November
  • Airfares fell 1.2%, and follows November’s 4.0% drop
  • New vehicles prices dropped 0.4% after a 0.6% decline in November
  • Meats, poultry, fish and eggs declined 0.5%, although up 5.1% for the year

In contrast:

  • Medical care prices increased for the third straight month, rising 0.3%
  • Education and communication prices rose 0.3%

Housing prices, which accounts for about 40% of the CPI index, were unchanged after declining 0.1 percent in November.

In a separate Labor Department report Thursday, producer prices fell 1.9% and for the fifth consecutive month in December. A sister report to the CPI, the Producer Price Index measures prices at the factory door and inflation pressures before they reach the consumer.

RELATED ARTICLES

Leave a Reply

- Advertisment -

Most Popular

Recent Comments