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TheStreet Open House

US Consumer Prices Unchanged In December

By CHRISTOPHER S. RUGABER

WASHINGTON (AP) â¿¿ Lower gas costs offset more expensive food and higher rents to keep a measure of U.S. consumer prices flat last month.

The Labor Department said Wednesday that food prices increased 0.2 percent in December from November. Rents and airline fares also rose. Gasoline prices fell a seasonally adjusted 2.3 percent.

The flat reading of the December consumer price index caps a year when inflation slowed. Consumer prices rose only 1.7 percent in 2012, down from 3 percent in 2011.

Food prices increased 1.8 percent last year, down from 4.7 percent in 2011. Gas prices rose just 1.7 percent last year. That followed annual gains of nearly 10 percent in 2011 and roughly 14 percent in 2010.

Excluding the volatile food and energy categories, core prices ticked up just 0.1 percent in December compared with November. And core prices rose only 1.9 percent in 2012. That's below the Federal Reserve's inflation target of 2 percent. And it's lower than 2011's increase of 2.2 percent.

Prices for household furniture, clothing and used cars declined in December from November.

Mild inflation leaves consumers with more money to spend, which is good for the economy. Lower inflation also makes it easier for the Fed to continue with its efforts to accelerate the economy. If the Fed were worried that prices are rising too fast, it might have to raise interest rates.

With job gains and economic growth steady but modest, many businesses are reluctant to raise prices for fear of losing customers. That's helped keep inflation tame. Workers also aren't able to demand higher wages when growth is weak. That limits their ability to pay more.

Price increases will likely remain mild, economists say.

"It remains our view that core inflation has peaked ... and will continue to drift lower in coming quarters as weak global economic activity weighs on pricing power," Joshua Shapiro, chief U.S. economist at MFR Inc., said in a note to clients.

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