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Friday, March 29, 2024
HomeNewsEconomyConsumer Prices In November Allegedly See Largest Drop In Six Years

Consumer Prices In November Allegedly See Largest Drop In Six Years

The Labor Department said Wednesday that U.S. consumer prices saw their biggest drop in nearly six years in the month of November fueled by falling gasoline prices. The Consumer Price Index fell 0.3 percent last month, which is the largest decline since December 2008, after a flat reading in October.

However, the report will do nothing to change views at the Federal Reserve, which will start raising interest rates in mid-2015. Inflation hawks, who were mocked for much of the period following the recession, have obviously won the argument against the dangers of runaway inflation.

In the 12 months through November, the CPI increased by only 1.3 percent, or the smallest measure since February, after increasing by 1.7 percent in October. Economist polled by Reuters had forecast the CPI falling by only 0.1 percent from October and actually increasing by 1.4 percent year-over-year.

Excluding food and energy prices, the so-called core CPI edged up just 0.1 percent after increasing 0.2 percent in October. So, despite falling gas prices, in the 12 months through November, the so-called core CPI still increased 1.7 percent after increasing 1.8 percent in October.

The Federal Reserve has set a target of 2 percent for inflation, but it tracks an index that is currently measuring even lower than the CPI. Falling crude oil prices that have hit a fresh 5-1/2 year low as of this week, have largely faced downward price pressure due to an increase in U.S. shale production and decreasing global demand.

Still, it is possible that low inflation rates could convince the Fed to keep its short-term interest rate near zero, where it has been since December 2008.

Gasoline prices decreased by 6.6 percent, according to the CPI, which is the biggest drop since December 2008, after declining 3.0 percent in October. Gasoline has now declined for five straight months.

Food prices rose 0.2 percent after nudging up 0.1 percent the prior month. Within the core CPI, shelter costs increased 0.3 percent last month after rising 0.2 percent in October.

There were also increases in airline fares, medical care and alcohol prices. New motor vehicle prices, however, fell as did the cost of household furnishings, apparel and used cars and trucks.

Written by

PPD Business, the economy-reporting arm of People's Pundit Daily, is "making sense of current events." We are a no-holds barred, news reporting pundit of, by, and for the people.

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