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Producer and Consumer Price Index' Down as Energy Prices Tumble

Declining energy costs pushed wholesale inflation down 1.9% in December, the fifth straight monthly decline, the Labor Department said. For the year, the government said wholesale prices fell 0.9%, the first annual decline since prices dropped 1.6% in 2001. Ironically, it was only about six months ago that soaring energy costs produced fears of high inflation. But since September, worries about inflation have been replaced by fears of prolonged recession, marked by massive deflation. However, core inflation, which excludes food and energy, posted a modest 0.2% gain in December. For the year, core inflation was up 4.3%, the biggest annual jump since a 4.4% increase in 1988. Energy prices last month fell 9.3%, reflecting a record 25.7% decline in the price of gasoline. Food costs dipped 1.5%.

Meanwhile consumer prices fell 0.7% in December, the Labor Department reported, due to a record drop in gasoline prices. For the year, consumer prices edged up 0.1%, compared to a 4.1% increase for all of 2007. Excluding volatile food and energy prices, core inflation was unchanged in December. For all of 2008, it was up a modest 1.8%, compared with a 2.4% increase for all of 2007. For December, gasoline prices plunged 17.2%, the largest monthly decline on records going back 71 years. Overall energy prices fell 8.3%, as home heating oil and natural gas also showed declines. For 2008, energy prices fell 21.3%, with gas prices down a whopping 43.1%. Food costs were unchanged in December, and grew 5.8% for all of last year.

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Date Last Updated: 01/28/2009