logo

FX.co ★ Consumer Prices Show Slowest Annual Rate Of Growth Since 1954

Consumer Prices Show Slowest Annual Rate Of Growth Since 1954

(RTTNews) - Consumer prices decreased for the third consecutive month in December, although the decline was not quite as steep as economists had been expecting. The annual rate of price growth still fell to its slowest pace in over fifty years.

A report released by the Labor Department on Friday showed that the consumer price index fell 0.7 percent in December following an unrevised 1.7 percent decrease in November. Economists had been expecting prices to fall by a somewhat more significant 1.0 percent.

Nonetheless, with the continued decrease, prices edged up only 0.1 percent compared to the same month of the previous year, marking the slowest annual rate of growth since 1954.

"The CPI fell more in November than it did in December, but the price drop was more broad-based this time," said Chris Low, Chief Economist at FTN Financial.

Low added, "Falling prices are showing up in an increasing number of industries, something that should come as no surprise given the limited spending power of consumers."

A continued decrease in energy prices contributed to the monthly drop in consumer prices, with energy prices falling by 8.3 percent in December, marking the fifth consecutive monthly decline. With the decrease, energy prices were down 21.3 percent year-over-year.

Transportation prices also showed a notable decrease, falling by 4.4 percent in December after showing a steep 9.8 percent drop in November. A 16.8 percent decrease by motor fuel prices contributed to decrease in transportation prices

Meanwhile, the Labor Department said that the core consumer price index, which excludes food and energy prices, was unchanged for the second consecutive month, compared to economist estimates of a 0.1 percent increase.

On an annual basis, core prices were up 1.8 percent compared to December of 2007, reflecting a slowdown in the rate of annual price growth from 2.0 percent in November.

"In the famed economist Milton Friedman's opinion, inflation is always a monetary phenomenon," Peter Boockvar, equity strategist at Miller Tabak noted. "If the theory holds and with the path the Fed has gone down, we are headed for a sharp ramp in inflation once the economy starts to stabilize and the velocity of money starts to increase."

Thursday morning, the Labor Department released a separate report showing that producer prices fell 1.9 percent in December following an unrevised 2.2 percent decrease in November. The decrease by the index came in line with economists' expectations.

A continued decrease in energy prices contributed to the notable drop in producer prices, with energy prices falling by 9.3 percent in December after a 11.2 percent decrease in November.

Food prices also showed a notable decrease, slipping 1.5 percent in December after coming in unchanged in the previous month.

Excluding food and energy prices, the core producer price index edged up 0.2 percent in December after rising 0.1 percent in November. Economists had been expecting core prices to show another 0.1 percent increase.

For comments and feedback: contact editorial@rttnews.com

Copyright(c) 2009 RealTimeTraders.com, Inc. All Rights Reserved

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade
Go to the articles list Open trading account