Low fuel costs causes drop in consumer prices
Consumer prices in the US were pulled lower because of low gasoline prices, which eased inflation in the economy.
According to the US Labor Department, inflation in November fell to a seasonally-adjusted 0.3 percent.
Gas prices plunged by 10.5 percent last month, which is the biggest decline in almost six years.
Jennifer Lee, an economist at BMO Capital Markets, said:
“If you’re looking for signs of inflation, you will have to look elsewhere,”
Core inflation, which excludes energy and food prices, increase by 0.1 percent last month and over the past year overall inflation has raised 1.3 percent, while core inflation gained 1.7 percent.
These figures are below the 2 percent inflation target set by the Federal Reserve, allowing the Fed to keep key interest rate at or near zero.
As oil prices plunge and the dollar gains momentum, which has lowered the price of foreign-made goods, inflation has eased. In fact, prices haven’t changed much at all, despite the unemployment rate down to 5.8 percent.
Since the summer high of over $100 per barrel, oil has now dropped to the $60 mark. This is because there is a a huge oversupply of the commodity on the market and there is weak demand as Japan has fallen into a recession, the eurozone is growing at a sluggish rate, and Russia may be about to enter into a recession..
However, consumers across America haven’t been subject to these international pressures and have significantly benefits from less expensive oil.
Consumer prices for clothing, automobiles, and household furnishings fell last month. While prices did not rise for airline fees, medical care, beef, ham, chicken, and alcohol.
Cheaper gas prices appears to have had an effect on consumer spending, given the amount of spending at the beginning of the holiday shopping season, with retail sales rising by a seasonally-adjusted 0.7 percent in November.