WASHINGTON -- Consumer prices slipped 0.1 percent last month, pulled down by sharply lower gas prices and cheaper airfares, used cars and mobile phone plans.
The consumer price index rose just 1.9 percent in December from a year earlier, the Labor Department said Friday, the first time it has fallen below 2 percent since August 2017.
Excluding the volatile energy and food categories, core prices rose 0.2 percent for the third month in a row. They rose 2.2 percent from a year ago for the second-straight month.
The cost of many goods was unchanged in December: Prices for clothes, shoes and new cars were flat.
Gasoline prices plunged 7.5 percent in December, the most in almost three years. They have since fallen further: Gas prices averaged $2.24 a gallon nationwide on Friday, according to AAA, down from $2.41 a month ago. That reflects a steep drop in oil prices, which have tumbled partly over fears of weakness in the global economy.
Food costs rose 0.4 percent last month, the biggest increase in 4½ years. Fruit and vegetable prices jumped 1.7 percent while the cost of eating out rose 0.4 percent.
Full-service restaurants, facing higher labor and food costs, raised prices the most in more than seven years in December, the Labor Department said in a separate report Friday.
The gap between how much it costs to eat out instead of grocery shopping "has continued to widen pretty aggressively. It's a problem," said Michael Halen, a Bloomberg Intelligence analyst.
Full-service restaurant prices climbed 0.5 percent in December from the prior month, the biggest gain since March 2011, while limited-service restaurants posted a 0.4 percent price increase, the most in almost a year.
The report showed used-car prices fell 0.2 percent, the first decline in three months and following two increases of more than 2 percent. New-car prices were unchanged for a second month.
Shelter costs, which account for one- third of the consumer price index, rose 0.3 percent for a second month. That reflected 0.2 percent increases in both owners-equivalent rent -- one of the categories designed to track rental prices -- and rent of primary residence, while hotel and motel rates advanced the most since May.
Prices for medical care, which make up 8.6 percent of the index, rose 0.3 percent from the prior month.
The consumer price index is the broadest of three price gauges from the Labor Department because it includes all goods and services. About 60 percent of the index covers the prices that consumers pay for services ranging from medical visits to airline fares, movie tickets and rents.
The figures suggest that the healthy economy is not yet creating widespread inflation pressures. That gives the Federal Reserve more leeway in deciding whether to raise short-term interest rates. Fed Chairman Jerome Powell has said the Fed can be "patient" regarding rate increases this year.
Charles Evans, president of the Fed's Chicago regional bank, said Wednesday that mild inflation data allow the Fed to "wait and carefully take stock of the incoming data and other developments" before deciding on future rate increases.
Fed policymakers lifted short-term rates four times last year and have forecast two more increases this year. Yet investors and some analysts think that slower U.S. and global growth this year, combined with low inflation, will keep the Fed from raising rates at all.
December figures for the Fed's preferred gauge of inflation -- a separate measure related to consumption -- are scheduled for release on Jan. 31, though the report could be delayed because of the partial government shutdown. The Fed-preferred index and its core gauge tend to run slightly below the Labor Department's consumer price index measures.
Labor Department economic releases are proceeding as scheduled, as the agency isn't part of the partial federal government shutdown.
Information for this article was contributed by Christopher Rugaber of The Associated Press and by Carmen Reinicke, Craig Giammona and Katia Dmitrieva of Bloomberg News.
Business on 01/12/2019