:format(jpeg)/cloudfront-us-east-1.images.arcpublishing.com/tgam/S5A5JWTQ7ZIC7P5W523SXAA4JI.jpg)
A woman shops at a grocery store in Glenview, Ill., on Nov. 19, 2022.NAM Y. HUH/THE ASSOCIATED PRESS
U.S consumer prices unexpectedly fell for the first time in more than 2½ years in December amid declining prices for gasoline and other goods, suggesting that inflation was now on a sustained downward trend.
The consumer price index dipped 0.1 per cent last month after gaining 0.1 per cent in November, the Labor Department said on Thursday. That was the first decline in the CPI since May 2020, when the economy was reeling from the first wave of COVID-19 infections.
Economists polled by Reuters had forecast the CPI unchanged.
In the 12 months through December, the CPI increased 6.5 per cent. That was the smallest rise since October 2021 and followed a 7.1 per cent advance in November. The annual CPI peaked at 9.1 per cent in June, which was the biggest increase since November 1981. Inflation remains well above the Federal Reserve’s 2 per cent target.
Price pressures are subsiding as the U.S. central bank’s fastest monetary policy tightening cycle since the 1980s dampens demand, and bottlenecks in the supply chains ease.
Gasoline prices fell 12.5 per cent in December, according to data from the U.S. Energy Information Administration.
Prices for used cars and trucks are also declining as the supply of motor vehicles improves. Ebbing demand has left retailers holding excess merchandise, forcing them to offer discounts for products like apparel and furniture.
While goods disinflation has set in, services prices remain solid, underpinned by sticky rents. Even stripping out rents, services inflation is firm, reflecting still-strong wage growth.
The Fed last year raised its policy rate by 425 basis points from near zero to a 4.25 per cent-4.50 per cent range, the highest since late 2007. In December, it projected at least an additional 75 basis points of hikes in borrowing costs by the end of 2023.
Excluding the volatile food and energy components, the CPI climbed 0.3 per cent last month after rising 0.2 per cent in November. In the 12 months through December, the so-called core CPI increased 5.7 per cent after advancing 6.0 per cent in November.