Cheaper Gas Lowers U.S. Consumer Prices 0.3%

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Cheaper gas lowers U.S. consumer prices 0.3%WASHINGTON -- A steep fall in gas costs pushed down a measure of U.S. consumer prices last month, keeping inflation mild.

The seasonally adjusted consumer price index dropped 0.3 percent in November from October, the Labor Department said Friday. Gas prices fell 7.4 percent, the biggest drop in nearly four years. That offset a 0.2 percent rise in food prices.

In the past year, consumer prices have risen 1.8 percent, down from October's 12-month increase of 2.2 percent.

Excluding the volatile food and gas categories, prices ticked up 0.1 percent in November. Core prices have risen 1.9 percent in the past year -- below the Fed's annual target of 2 percent.

Higher rents, airline fares and new cars pushed up core prices last month. The cost of clothing and used cars fell.

"In simplest terms, inflation is not a problem," Jim Baird, chief investment strategist at Plante Moran Financial Advisors, said. Lower inflation "is a real positive that should provide modest relief for households dealing with limited income growth."

High unemployment and slow wage growth have made businesses reluctant to raise prices. Many worry higher prices could drive away customers. That's helped keep inflation tame.

Modest inflation leaves consumers with more money to spend, which can boost economic growth. Lower inflation also makes it easier for the Fed to continue with its efforts to rekindle the economy. If the Fed were worried that prices are rising too fast, it might have to raise interest rates.

The increase in food prices was smaller than many economists expected. This summer's drought in the Midwest, which scorched corn and soybean crops, has pushed up food prices. But the increase hasn't been dramatic so far. Food costs have risen 1.8 percent in the past 12 months.

Some items have seen big increases. The cost of milk, cheese and other dairy products have risen 0.8 percent in each of the past two months. That could reflect the higher cost of animal feed, which usually includes corn and soybeans. Cereals and baked goods rose 0.3 percent last month. But prices for the broad category of meat, chicken, fish and eggs fell in November, after a big gain the previous month.

The Fed said Wednesday that it now plans to keep the short-term interest rate it controls at nearly zero until the unemployment rate falls to at least 6.5 percent, as long as inflation isn't expected to top 2.5 percent in the next two years.

It was the clearest sign yet that they will keep rates super-low even after unemployment falls further and the economy picks up.

Unemployment was 7.7 percent last month and the Fed projects it will stay above 6.5 percent until late 2015. The Fed also projects inflation will stay at or below 2 percent for the next three years.

The Fed also said it would continue purchasing $85 billion in Treasury bonds and mortgage-backed securities each month in an effort to push down longer-term interest rates.


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33 Comments

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nthereoff

Gas over 3 dollars is still to high. Just because it down from last month doesn't mean much. Fewer cars on the road. Maybe they didn't hear the good news?

December 17 2012 at 6:45 PM Report abuse rate up rate down Reply
tj1108

Hilary Clinton fainted and has a concussion and cant testify about Bengahzi, give me a break. These lies would put people in prison if we had soceity that any guts. Demacrats should push for hearings and procecutions of all in the White house over these lies. They are worse than the Republicans and more in your face with their lies.

December 15 2012 at 11:34 PM Report abuse -1 rate up rate down Reply
coochiescooter

We're rich a whopping point three percent. We can get extra stuff Whooopeeee !

December 15 2012 at 12:58 PM Report abuse -5 rate up rate down Reply
1 reply to coochiescooter's comment
cpo1514

Now you can "afford" OhnoitsObama care.

December 17 2012 at 8:09 AM Report abuse -1 rate up rate down Reply
t_trevor2

Any word from the dumbest 1% on whether it was the evil speculators or the greedy consumers that caused the decrease in gas prices?

December 15 2012 at 10:14 AM Report abuse -3 rate up rate down Reply
1 reply to t_trevor2's comment
coochiescooter

Evan / Chrissy / Somey / Boehnerisababy / Teapartyiswhacke / Phasejump / smaselli13 / mdbass201 etc. etc. should be along anytime now.

December 15 2012 at 12:29 PM Report abuse -5 rate up rate down Reply
s.kohanski

The government hates lower gas prices, especially with Obama's tax and spend agenda. On the average Uncle Sam gets 18.4 cents per gallon and state and local governments gets 30.9 cents per gallon. Tax revenue ! Obama loves tax revenue to continue his accelerated investing in America and other foreign countries.

December 14 2012 at 7:03 PM Report abuse -3 rate up rate down Reply
David

Are you getting the message here Nobama?

December 14 2012 at 4:07 PM Report abuse -3 rate up rate down Reply
1 reply to David's comment
s.kohanski

Nobama still wouldn't get the message if it was tattooed on his forehead.

December 14 2012 at 6:44 PM Report abuse -3 rate up rate down Reply
cpo1514

Over $3.00 +per gallon is cheap???? The lower demand is due to the higher unemployment and the creation of the permanent underclass that may never get to work again>>>>

Les have an article about the closing down of America!!! Thought not.

December 14 2012 at 3:45 PM Report abuse -5 rate up rate down Reply
Jerry

Hmm....I don't hear any Republicans mentioning the price of gasoline anymore...Wonder why?

December 14 2012 at 3:15 PM Report abuse +2 rate up rate down Reply
vieragam

Because of gas prices, we had to change things up at our house. Before I start my car I map the chores I have to do before I leave. Don't drive unless it is important. Using this methid we saved a lot in 2012 over 2011 on gas. And even more over 2010. Oops...go to gas buddy andsee if cheap gas is close to you. Do not drive out of the way for a few cents cheaper.

December 14 2012 at 1:10 PM Report abuse rate up rate down Reply
1 reply to vieragam's comment
cpo1514

Kind of like the third world country Obama is taking America to in his journey!

December 17 2012 at 8:12 AM Report abuse -1 rate up rate down Reply
Taina

Since energy and food were taken out of the CPI, how can they be used to show a drop in inflation? When prices are no going up the size of the container is getting smaller.

December 14 2012 at 12:23 PM Report abuse rate up rate down Reply