US Inflation in 2014 Second Weakest Since 1961

United States inflation in 2014 eased as American consumers spent more at grocery stores but much less when filling up at gas stations — especially in November and December.

Inflation in the U.S. climbed 0.8% last year, the second weakest level for a calendar year in the last five decades. Going back, inflation in 2008 tumbled to 0.1%, with the next lowest year back in 1961 when inflation hit 0.7%.

Most recently, consumer prices in December fell 0.4%, marking the biggest monthly drop in the government’s Consumer Price Index (CPI) since December 2008, and after sliding 0.3% in November. Gasoline prices tumbled 9.4% last month, with the overall energy index down 9.1%. Conversely, food prices rose 0.3% — above flat for 12 straight months.

"The consumer should feel great" as cheaper gasoline "frees up a lot of income for people to make purchases on other goods and services," said Brian Jones, a senior U.S. economist at Societe Generale SA in New York. "For the next several months, we’re going to see negative headline prints on the CPI primarily because of the weakness in gasoline pump prices."

Stripping food and energy prices, the so-called core inflation rate was unchanged in December after rising 0.1% in November. For all of 2014, the core inflation rate rose 1.6%, the weakest 12-month level since the 12 months ended February 2014, and after rising 1.7% in the 12 months through November.

Year-Over-Year Changes

The U.S. inflation rate of 0.8% for 2014 compares to a 1.5% increase in 2013, and is well below the 2.1% average annual increase over the last 10 years.

Gasoline prices plummeted 21% last year compared to 1% decline in the prior year. The price of electricity rose 3.1% in 2014, which was just a tad lower than the 3.2% increase in 2013.

Food prices shot up 3.4% in 2014 compared to a more modest increase of 1.1% in the previous year.

"The index for meats, poultry, fish, and eggs, which rose 2.9 percent in 2013, increased 9.2 percent, its largest December-December increase since 2003," the Labor Department reported.

Gaining the most in the food category were beef and veal with their prices soaring 18.7% in 2014. Dairy products also jumped, up 5.3% in 2014 compared to a decline in 2013. Shelter, rents and medical care also rose quicker in 2014, up 2.9%, 3.4% and 3% compared to prior year gains of 2.5%, 2.6% and 2%.

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: June – Dec 2014 Consumer Prices (%)

  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

 

Here is the summary report of the Consumer Price Index by the Labor Department’s BLS. It was published on Friday, January 16, 2015.

Summary of Consumer Prices for December 2014

The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.4% in December on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 0.8 % before seasonal adjustment.

The gasoline index continued to fall sharply, declining 9.4% and leading to the decrease in the seasonally adjusted all items index. The fuel oil index also fell sharply, and the energy index posted its largest one-month decline since December 2008, although the indexes for natural gas and for electricity both increased. The food index, in contrast, rose 0.3%, its largest increase since September.

The index for all items less food and energy was unchanged in December, following a 0.2% increase in October and a 0.1% rise in November. This was only the second time since 2010 that it did not increase. 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 all items index increased 0.8% over the last 12 months. This is notably lower than the 1.3% change for the 12 months ending November. The energy index has declined 10.6% over the span. In contrast, the 3.4% increase in the food index is its largest 12-month increase since February 2012. The index for all items less food and energy has increased 1.6 % over the last 12 months, its smallest 12-month change since the 12 months ending February 2014.

Food Inflation

The food index rose 0.3% in December after a 0.2% increase in November. The index for food at home rose 0.3% with five of the six major grocery store food groups increasing. The index for dairy and related products posted the largest increase, rising 0.6% after declining in November.

The fruits and vegetables index rose 0.4%, with the fresh vegetables index rising 2.4% but the index for fresh fruits declining 1.3%. The index for meats, poultry, fish, and eggs increased 0.3% as the index for beef and veal continued to rise, advancing 0.7%. The index for other food at home increased 0.3%, and the cereals and bakery products index advanced 0.2%.

The nonalcoholic beverages index, in contrast, declined in December, falling 0.4% after rising in each of the previous three months. The food at home index has risen 3.7% over the last 12 months, with all six groups rising over the span. The index for food away from home rose 0.3% in December after a 0.4% increase in November, and has risen 3.0% over the last year.

Energy Inflation

The energy index continued to decline, falling 4.7% in December after a 3.8% decrease in November. This was its sixth decline in a row, and the index has fallen 13.3% over the six month span.

The gasoline index fell 9.4% in December and has declined 22.4% since June. (Before seasonal adjustment, gasoline prices fell 11.1% in December.) The fuel oil index also continued to decline, falling 7.8%, its largest decline since June 2012. However, the index for natural gas turned up in December, rising 1.5% after falling in October and November. The electricity index also increased in December, rising 0.8%.

All items less food and energy

The index for all items less food and energy was unchanged in December. The shelter index increased, advancing 0.2%, with the indexes for rent, owners’ equivalent rent, and lodging away from home all rising 0.2%. The medical care index rose 0.5% in December. The index for prescription drugs rose 0.9%, and the hospital services index increased 0.5%. The tobacco index advanced in December, increasing 0.8%, and the personal care index rose 0.1%.

A wide array of declines offset these increases. The apparel index fell 1.2% in December following a 1.1% decline the prior month. The index for airline fares, which rose in October and November, fell sharply in December, declining 5.0%. The index for used cars and trucks fell 1.2%, the same decline as last month. The index for household furnishings and operations fell 0.3%, as did the alcoholic beverages index. The index for new vehicles declined 0.1%, the same decrease as in November.

Not seasonally adjusted CPI measures

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.8% over the last 12 months to an index level of 234.812 (1982-84=100). For the month, the index fell 0.6% prior to seasonal adjustment. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 0.3% over the last 12 months to an index level of 229.909 (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) increased 0.3 % over the last 12 months. For the month, the index fell 0.8% on a not seasonally adjusted basis. Please note that the indexes for the post-2012 period are subject to revision.

Next CPI Report

The Consumer Price Index report for January will be released on February 26, 2015 at 8:30 a.m. (EDT).

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