December Consumer Price Index: Steady As It Goes

The prices consumers paid in December were roughly the same as they paid in November. The monthly Consumer Price Index for All Urban Consumers (CPI-U) survey was released Thursday, showing a zero percent change on “All Items”on a seasonally adjusted basis. Over the last 12 months an increase of 3% has been recorded.

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The All Items statistic could be misleading in this case; prices for many items did increase modestly, but the overall average was kept down by drops in energy commodities (-1.9%) and energy services (-0.3%), the same pattern as was seen in the Producer Price Index for December. Indeed, the CPI index for all items less food and energy increased by 0.1%, after rising 0.2% in November. The largest gain by category in December was 0.4% for medical care services.

Some annual comparisons between 2010 and 2011 might be helpful here. The All Items CPI doubled in 2011 at 3% compared to 1.5% in 2010; this rise was lessened by a 1.1% drop in the energy index over the same period, a pattern seen especially in the last two months.

Prices consumers paid for food at home increased 6% in 2011, up from 1.7% in 2010, with dairy and related products being the steepest rise (8.1%) and fruits and vegetables the smallest at 2.3%. At the same time, the index for food away from home rose far more modestly, at 2.9% in 2011 up from 1.3% in 2010. This could be interpreted as consumers visiting grocery stores more than restaurants, which is still keeping with a recessionary pattern, though the latter index shows a slight movement away from that during this past year.

Other year to year changes, all up in 2011 after being down in 2010, were for apparel, 4.6%; new vehicles, 3.2%; and shelter at 1.9%. The figure for new vehicles, if it reflects increased demand more than increased costs could be significant: increased demand for big ticket items can indicate that the economy is growing. Further, it seems to be growing with very modest price level increases – so far. This is welcome news while we have it, but it rarely lasts as the economy picks up speed. That is usually the price of economic progress.

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