US Inflation Falls for First Time Since 2009

U.S. consumer prices in January declined for a third month in a row, and by the biggest amount during a month in six years. In another multi-year event, inflation over the past 12 months went negative for the first time in over five years.

Falling energy prices was overwhelmingly the cause of the decline, according to a U.S. Labor Department report released Thursday, February 26, 2015.

The Consumer Price Index (CPI) declined 0.7% in January, the sharpest monthly drop since December 2008 and after two straight monthly dips of 0.3%.

"The energy index fell 9.7 percent as the gasoline index fell 18.7 percent in January, the sharpest in a series of seven consecutive declines," the Labor Department’s Bureau of Labor Statistics said in its inflation report for January. "The gasoline decrease was overwhelmingly the cause of the decline in the all items index, which would have risen 0.1 percent had the gasoline index been unchanged."

Gasoline prices are 35.4% lower than 12 months ago.

"This deflation is nothing to worry about," wrote Paul Ashworth of Capital Economics. "For a net importer like the US, lower gasoline prices are a good thing. Moreover, with the real economy doing well, there is little danger that this temporary bout of falling energy prices will develop into a more insidious debt-deflation spiral."

Deflation, a sustained rate of declining prices, can severely hamper an economy. But economists are not seeing that now since the last three monthly CPI pricing declines have been driven by falling energy.

Elsewhere, there was no change in food prices last month, which had gone up in each of the previous 12 months. They have advanced 3.2% in the past year.

Stripping food and energy expenses, the core inflation rate or base consumer prices turned up 0.2% in January after not changing in December.

Year-Over-Year Changes

In the January 2014 to January 2015 period, the inflation rate fell 0.1% to log the first 12-month drop since October 2009. (Look at past inflation rates.) In contrast, inflation in the 12 months ended December rose 0.8%.

Finally, the core 12-month level rose 1.6% through January 2015, matching the prior annual increase.

Below are most-watched consumer prices by category as well as their month-over-month changes. The final column offers the annual changes. The prices for these items are gathered and published by the Bureau of Labor Statistics (BLS) each month.

US Inflation: July – January 2015 Consumer Prices (%)

  July 2014 Aug 2014 Sept 2014 Oct 2014 Nov 2014 Dec 2014 Jan 2015 12 Month
All items 0.1 -0.1 0.1 0.1 -0.3 -0.3 -0.7 -0.1
  Food 0.3 0.3 0.3 0.2 0.2 0.2 .0 3.2
    Food at home 0.3 0.3 0.3 0.2 0.1 0.2 -0.2 3.3
    Food away from home 0.3 0.2 0.3 0.2 0.4 0.3 0.2 3.1
  Energy -0.2 -1.7 -0.7 -1.2 -4.1 -4.7 -9.7 -19.6
    Energy commodities -0.4 -2.6 -0.9 -2.1 -7.0 -9.0 -18.0 -34.7
      Gasoline (all types) -0.4 -2.7 -0.9 -2.0 -7.2 -9.2 -18.7 -35.4
      Fuel oil -0.7 -1.2 -2.1 -4.0 -3.5 -7.8 -9.9 -29.7
    Energy services 0.2 -0.3 -0.4 -0.1 -0.3 0.8 -0.1 1.9
      Electricity 0.2 0.2 -0.7 0.5 .0 0.6 0.9 2.5
      Utility (piped) gas service .0 -1.9 0.4 -1.9 -1.3 1.4 -3.4 -0.4
  All items less food, energy 0.1 0.1 0.1 0.2 0.1 0.1 0.2 1.6
    Commodities less food, energy .0 -0.1 0.1 .0 -0.3 -0.2 -0.1 -0.8
      New vehicles 0.3 0.1 .0 0.1 .0 .0 -0.1 0.5
      Used cars and trucks -0.1 .0 .0 -0.6 -0.9 -0.8 -0.1 -4.0
      Apparel 0.1 -0.4 0.1 -0.3 -0.7 -0.8 0.3 -1.4
      Medical care 0.3 .0 0.5 0.2 0.6 0.9 -0.3 3.9
    Services less energy 0.1 0.1 0.2 0.2 0.2 0.2 0.3 2.5
      Shelter 0.3 0.2 0.3 0.2 0.2 0.2 0.3 2.9
      Transportation -0.6 -0.3 0.1 0.5 0.2 .0 0.4 2.1
      Medical care 0.1 0.1 0.1 0.2 0.3 0.3 0.1 2.3

And now, here is the summary report of the Consumer Price Index by the Labor Department’s BLS. It was published on Thursday, February 26, 2015.

Summary of Consumer Prices for January 2015

The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.7% in January on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index decreased 0.1% before seasonal adjustment.

The energy index fell 9.7% as the gasoline index fell 18.7% in January, the sharpest in a series of seven consecutive declines. The gasoline decrease was overwhelmingly the cause of the decline in the all items index, which would have risen 0.1% had the gasoline index been unchanged. The fuel oil index also fell sharply, and the index for natural gas turned down, although the electricity index rose. The food index was unchanged in January, with the food at home index falling for the first time since May 2013.

The index for all items less food and energy rose 0.2% in January. The shelter index rose 0.3%, and the indexes for personal care, for apparel, and for recreation increased as well. The medical care index was unchanged, while an array of indexes declined in January, including those for household furnishings and operations, alcoholic beverages, new vehicles, used cars and trucks, airline fares, and tobacco.

The all items index declined 0.1% over the last 12 months, the first negative 12-month change since the period ending October 2009. The energy index fell 19.6% over the span, with the gasoline index down 35.4%. The food index rose 3.2%, and the index for all items less food and energy increased 1.6%.

Food Inflation

The food index was unchanged in January after rising through all of 2014. The index for food at home turned down in January, falling 0.2% after increasing in each of the last 6 months. Four of the six major grocery store food groups declined in January. The fruits and vegetables index fell 0.9%, with the indexes for fresh fruits and fresh vegetables both declining. The dairy and related products index also fell 0.9%, its largest decline since April 2012.

The index for meats, poultry, fish, and eggs fell slightly in January, decreasing 0.1% despite the index for beef and veal rising 0.1%. The index for other food at home, which rose in November and December, also declined 0.1% in January.

The food at home index has increased 3.3% over the last 12 months, with all six major grocery store food group indexes rising over that span. The largest increase was posted by the meats, poultry, fish, and eggs group, which rose 8.7% with the beef and veal index increasing 19.0%. The index for food away from home increased 0.2% in January after a 0.3-percent increase in December and has risen 3.1% over the last 12 months.

Energy Inflation

The energy index fell 9.7% in January, its seventh consecutive decline and the largest 1-month decrease since November 2008. The 18.7-percent decline in the gasoline index was the main factor. (Before seasonal adjustment, gasoline prices fell 17.1% in January.) The fuel oil index also fell sharply, declining 9.9% after a 7.8-percent decline in December.

The index for natural gas, which rose in December, fell 3.4% in January. The electricity index was the only major energy component to increase, rising 0.9%, its largest increase since May 2014. The electricity index is also the only major energy component to rise over the last 12 months, increasing 2.5% over the span.

The gasoline and fuel oil indexes have declined sharply over the period, falling 35.4% and 29.7%, respectively. The index for natural gas has declined slightly over the span, decreasing 0.4%.

All items less food and energy

The index for all items less food and energy increased 0.2% in January. The shelter index increased 0.3%, with the rent and owners’ equivalent rent indexes both rising 0.2% and the index for lodging away from home rising 1.3%. The personal care index rose 0.6% in January, its largest increase since the inception of the index in 1999. The apparel index rose 0.3%, and the recreation index increased 0.2%.

The index for medical care was unchanged in January, with the index for medical care services rising, but the medical care commodities index falling. Several indexes posted modest declines in January. The index for household furnishings and operations fell 0.2%, and the indexes for new vehicles and for used cars and trucks both fell 0.1%. The index for alcoholic beverages fell 0.3%, as did the index for airline fares. The tobacco index also declined, falling 0.2% after rising in December.

The index for all items less food and energy has risen 1.6% over the past 12 months, the same figure as for the 12 months ending December. The index for shelter has risen 2.9% over the span, and the indexes for medical care, for new vehicles, and for alcoholic beverages are among those that have also increased. Indexes that have declined over the past year include those for used cars and trucks, airline fares, household furnishings and operations, and apparel.

Not seasonally adjusted CPI measures

The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.1% over the last 12 months to an index level of 233.707 (1982-84=100). For the month, the index fell 0.5% prior to seasonal adjustment.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) decreased 0.8% over the last 12 months to an index level of 228.294 (1982-84=100). For the month, the index fell 0.7% prior to seasonal adjustment.

The Chained Consumer Price Index for All Urban Consumers (C-CPI-U) decreased 0.6% over the last 12 months. For the month, the index fell 0.7% on a not seasonally adjusted basis. Please note that the indexes for the past 10 to 12 months are subject to revision.

Next CPI Report

The Consumer Price Index report for February will be released on March 24, 2015 at 8:30 a.m. (EDT).

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