Annual US Inflation in 2014 Rises 0.8%

US consumer prices in December dropped the most for a month in six years as energy costs plummeted, according to government figures released Friday, and inflation in 2014 was the second weakest for a calendar year in the last five decades.

Consumer price fell 0.4% in December, the largest decline since December 2008, after sliding 0.3% in November, according to the US Labor Department and its monthly report on the Consumer Price Index (CPI). The CPI measures what American pays for everything from eggs, to cloths, to airline tickets, to cars.

Energy prices plummeted 4.7% for the month and 10.6% from a year ago. Declines in energy were led by gasoline. US consumers paid 9.4% less at the pump last month and 21% less than a year earlier. In dollars, Households in 2014 saved an average of about $115 on gasoline compared to 2013, according to auto group AAA, with the majority of the savings realized during the last few months of the year. At the end of it, AAA noted, the average price of regular unleaded gasoline was $2.26 per gallon, the lowest level since May 12, 2009.

A slower pace of inflation means consumers can buy more with their money, making them happier, but a sustained decline in consumer prices over an extended period, described as deflation, can wreak havoc on an economy. Right now, falling energy prices are not filtering down widely to other areas.

Case in point, not all was merry for Americans. While paying less driving to grocery stores they spent more once they got there. Food prices advanced in every month of the year, rising 0.3% in December and 3.4% from 2013. In December alone, costs for dairy and related products were up 0.6%; fruits and vegetables, 0.4%; and meats, poultry, fish and eggs, 0.3%. Meats, poultry, fish and eggs jumped 9.2% in 2014 for the biggest calendar year leap since 2003. Beef and veal soared 18.7% last year.

Stripping out food and energy, which economists like for analysis since the two components are most volatile, so-called core consumer prices were unchanged in December after rising 0.1% in November.

"This was only the second time since 2010 that it did not increase," the Labor Department noted. "The shelter index continued to rise, and the index for medical care posted its largest increase since August 2013. However, these increases were offset by declines in a broad array of indexes including apparel, airline fares, used cars and trucks, household furnishings and operations, and new vehicles," the agency added.

As recently as May, the core inflation rate surged 0.3% for the biggest increase since August 2011.

US inflation rose 0.8% in 2014, the smallest gain for a calendar year since 2008, when it increased 0.1%. The weakest inflation rate for a year before then was in 1961 at 0.7%.

Earlier 12-month inflation rates published by the Labor Department in 2014 include the increase of 1.3% in November; matching gains of 1.7% in October, September and August; the 2% pick up in July; the advance of 2.1% in May and June; the 2% increase in April; the gain of 1.5% in March; the 1.1% rise in February; and the climb of 1.6% in January.

Core US inflation advanced 1.6% in 2014, the smallest 12-month change since the 12 months ending February 2014, after rising 1.7% in November.

"This is a number that consumers will love but economists will worry about," Bloomberg News quoted Russell Price, senior economist at Ameriprise Financial Inc. in Detroit, who correctly projected the year-over-year change in the core index. As plunging commodity prices "filter through the system, it should take nine months to a year, then we should start to see inflation in the U.S. and around the world start to pick back up."

The core 12-month reading is the benchmark inflation figure monitored by the Federal Open Market Committee (FOMC) as it helps in deciding where to set the key interest rate. The current 1.6% reading is well below the Fed’s 2% annual inflation target.

"For now, with the activity outlook strong and improving, it makes more sense for the Fed to ‘look through’ a temporary bout of headline deflation and raise rates, most probably by June," Kitco quoted Paul Dales, senior U.S. economist at Capital Economics

Past 12-month core inflation rates reported in 2014 include an increase of 1.8% in October; matching gains of 1.7% in September and August; the same 1.9% increases in July and June; the May climb of 2%, the April increase of 1.8%; the March advance of 1.7%; and matching gains of 1.6% in February and in January.

Inflation data below offers recent monthly and annual percentage changes in prices of consumer goods and services that were surveyed and analyzed by the Labor Department’s Bureau of Labor Statistics.

June 2014 – December 2014 Consumer Prices – Gains & Losses in Percent

  June 2014 July 2014 Aug 2014 Sept 2014 Oct 2014 Nov 2014 Dec 2014 12 Month
All items 0.3 0.1 -0.2 0.1 .0 -0.3 -0.4 0.8
  Food 0.1 0.4 0.2 0.3 0.1 0.2 0.3 3.4
    Food at home .0 0.4 0.2 0.3 0.1 0.1 0.3 3.7
    Food away from home 0.2 0.3 0.2 0.3 0.2 0.4 0.3 3.0
  Energy 1.6 -0.3 -2.6 -0.7 -1.9 -3.8 -4.7 -10.6
    Energy commodities 3.0 -0.3 -3.9 -1.1 -3.0 -6.4 -9.1 -20.5
      Gasoline (all types) 3.3 -0.3 -4.1 -1.0 -3.0 -6.6 -9.4 -21.0
      Fuel oil -1.7 -0.7 -1.2 -2.1 -4.0 -3.5 -7.8 -19.1
    Energy services -0.4 -0.4 -0.6 -0.2 -0.2 -0.3 1.0 3.7
      Electricity 0.2 -0.3 0.1 -0.7 0.5 0.1 0.8 3.1
      Utility (piped) gas service -2.6 -0.4 -2.8 1.6 -2.7 -1.7 1.5 5.8
  All items less food, energy 0.1 0.1 .0 0.1 0.2 0.1 .0 1.6
    Commodities less food, energy 0.1 .0 -0.1 .0 .0 -0.4 -0.3 -0.8
      New vehicles -0.3 0.3 0.2 .0 0.2 -0.1 -0.1 0.5
      Used cars and trucks -0.4 -0.3 -0.3 -0.1 -0.9 -1.2 -1.2 -4.2
      Apparel 0.5 0.2 -0.2 .0 -0.2 -1.1 -1.2 -2.0
      Medical care 0.7 0.3 -0.1 0.5 .0 0.6 1.0 4.8
    Services less energy 0.1 0.1 .0 0.2 0.3 0.2 0.1 2.4
      Shelter 0.2 0.3 0.2 0.3 0.2 0.3 0.2 2.9
      Transportation 0.1 -0.7 -0.6 0.1 0.8 0.3 -0.5 1.7
      Medical care .0 0.1 .0 0.1 0.2 0.4 0.3 2.4

 

US inflation data from the Bureau of Labor Statistic (BLS) is published monthly. The information details consumer prices through to the previous month. Data for January inflation and the annual period, as provided by the Consumer Price Index (CPI) and BLS summary report, is scheduled for release on February 26, 2015.

CPI data is used to calculate US inflation rates and it is also the backbone for this site’s inflation calculator. The US Inflation Calculator provides accumulated inflation and the change in buying power of the US dollar between two dates.

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