Consumer Prices in U.S. Little Changed in December as Fuel Costs Decreased
The cost of living in the U.S. was little changed in December for a second month as stores cut prices to boost holiday sales and fuel expenses fell, reinforcing the Federal Reserve’s view that inflation will remain in check.
The unchanged reading in the consumer-price index reported by the Labor Department today in Washington compared with a median forecast of a 0.1 percent gain, according to a Bloomberg News survey of 78 economists. Excluding (CPUPXCHG) volatile food and fuel costs, the so-called core rose 0.1 percent as projected.
Retailers from Williams-Sonoma Inc. (WSM) to Macy’s Inc. (M) used discounts to attract customers constrained by stagnant incomes and property values that keep falling as the housing market struggles to recover. Less inflation means Federal Reserve officials have leeway to take additional steps to spur growth should the economic expansion stumble.
“There are no signs of budding inflationary pressures,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh, who accurately forecast prices would remain steady. “The core index is going to be pleasing to the Fed.”
Economists’ estimates ranged from a drop of 0.1 percent to a gain of 0.3 percent.
Consumer prices increased 3 percent in the 12 months ended in December, the biggest annual gain since 2007.
The increase in the core gauge followed a 0.2 percent increase in November and matched the 0.1 percent gain median forecast of economists surveyed. They were up 2.2 percent for all of 2011, also the most since 2007.
Fewer Americans than forecast filed applications for unemployment benefits last week, easing concern that post- holiday firings were on the rise.
Jobless claims plunged by 50,000 to 352,000 in the week ended Jan. 14, the lowest level since April 2008, Labor Department figures showed today in Washington. The median forecast of 41 economists in a Bloomberg News survey projected 384,000. A Labor Department spokesman said the decrease reflected the usual volatility seen during this time of year.
Builders began work on fewer houses than forecast in December, capping the worst year on record for single-family home construction and signaling recovery in the industry will take time to develop, figures from the Commerce Department also showed today. Housing starts dropped 4.1 percent to a 657,000 annual rate last month, reflecting a slump in multifamily units.
Stock-index futures held earlier gains after the reports. The contract on the Standard & Poor’s 500 Index maturing in March rose 0.5 percent to 1,308.3 at 8:48 a.m. in New York. Treasury securities fell, sending the yield on the benchmark 10- year note up to 1.93 percent from 1.90 percent late yesterday.
Today’s report showed energy costs decreased 1.3 percent from a month earlier.
The cost of a gallon of regular gasoline at the pump averaged $3.26 in December, down from $3.38 the prior month, according to data from AAA, the nation’s largest auto group.
Food costs increased 0.2 percent, reflecting higher prices for meats.
The increase in the core measure was driven by increases in rents and medical care. Falling costs for new and used cars and clothing limited the gain.
Chains including Macy’s, Gap Inc. and Target Corp. offered discounts on already marked-down merchandise in the week after Christmas. Williams-Sonoma, the owner of the namesake, Pottery Barn and West Elm home-goods chains, last week said profit may be less than previously forecast due to holiday price-cutting.
Williams-Sonoma faced “greater challenges” given the heavy market discounting on nationally branded products, Chief Executive Officer Laura Alber said in a Jan. 12 statement.
Inflation and pressures to raise prices “were very limited” at the end of last year, the Fed said in its Beige Book anecdotal business survey released on Jan. 11. Several district banks reported that “upward price pressures from rising commodity and input prices have eased substantially,” the report said.
Policy makers will use the report as a basis for framing their discussions at their next meeting on Jan. 24-25.
While the labor market is improving, paychecks are failing to keep up with even limited inflation. Hourly earnings adjusted for inflation rose 0.2 percent in December.
The CPI is the broadest of three price gauges from the Labor Department because it includes goods and services. Almost 60 percent of the index covers prices consumers pay for services ranging from medical visits to airline fares, movie tickets and rents.
A report yesterday showed producer prices fell 0.1 percent in December, while the import-price index, released last week, declined for the fourth time in the past five months.
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