The Bureau of Labor Statistics reported that the consumer price index (CPI) was unchanged in both November and December, reflecting an easing of inflationary concerns in the final quarter of 2011. In general, this easing has been the result of lower energy costs, which were down 1.3 percent in December.
Even with the decline, energy prices are 6.6 percent higher than one year ago. Food prices, on the other hand, were up 0.2 percent for the month, or 4.7 percent year-over-year.
Core inflation, which excludes food and energy costs, rose 0.1 percent in December. On an annual basis, overall and core prices have risen 3.0 percent and 2.2 percent. The core rates have risen gradually with each passing month in 2011. Nonetheless, consumer inflation remains modest overall.
Outside of food and energy, the largest year-over-year price increases were seen in transportation (up 5.2 percent since December 2010), apparel (up 4.6 percent) and medical care (up 3.5 percent). Monthly price declines, though, were observed in apparel, computers and motor vehicles.
Overall, these numbers reflect welcome news for consumers, with modest inflation helping to ease Americans’ pocketbooks. Even with core inflation exceeding 2 percent, pricing pressures are not sufficient enough to warrant tighter monetary policy, at least not yet. The larger debate regarding monetary policy, is not one of tightening, but one of whether to stand pat or ease further.
Chad Moutray is chief economist, National Association of Manufacturers.