WASHINGTON – U.S. consumer prices staged a surprise 0.1 percent fall in December but were up an expected 0.2 percent when energy and food costs were excluded, a report by the Labor Department showed on Wednesday.
Economists had forecast consumer prices would rise 0.2 percent after November's 0.6 percent drop, but declines in the cost of energy, transportation and apparel more than offset increases in the price of education, food and shelter.
Over the past year, consumer prices have climbed 3.4 percent, a slowdown from November's 3.5 percent 12-month inflation rate but still above the annual rise in average weekly earnings - meaning consumer budgets are not keeping pace with rising prices.
On a year-over-year basis, core prices were up 2.2 percent, the fastest pace since March and slightly above the Federal Reserve's presumed comfort range for price increases. The Fed has been raising interest rates since mid-2004 in a bid to head off inflation pressures and is expected to increase borrowing costs again at the end of January.
The decline in overall consumer prices in December was driven by a 2.2 percent decrease in energy prices, a 0.8 percent dip in transportation costs and a 0.3 percent fall in the cost of apparel, the Labor Department report showed.
Gasoline prices fell 2.6 percent, natural gas costs were down 3.5 percent and fuel oil prices fell 2.5 percent last month. Electricity costs were down a milder 0.6 percent.
In a separate report, the Labor Department said real average weekly earnings rose 0.1 in December after a 0.8 percent gain the prior month. Average weekly earnings have risen 3.1 percent from December 2004, but since inflation has risen even faster, real earnings remain 0.4 percent lower than a year earlier.