Digital Zeitgeist – For The First Time Since May 2020 US Prices Have Fallen And The Inflation Rate Has Dropped To 6.5%
It was the first time since May of 2020 that prices fell in the United States in December, which is a hopeful indicator that the inflation issue may be beginning to ease.
The most recent consumer price index (CPI), which monitors prices across a wide variety of goods and services, found that the cost of living decreased by 0.1% in December, following an increase of 0.1% in November. According to the Bureau of Labor Statistics, the annual rate of inflation dropped to 6.5% from 7.1% in the previous month. This is the sixth consecutive month in which the annual rate of inflation has decreased.
Rises in shelter indices, which increased 0.8% over the month and were 7.5% higher than they were a year ago, were more than offset by increases in gas prices, which fell 9.4% for the month. Gas prices were the single greatest contribution to the monthly drop, falling 9.4% over the month.
This news lifted the spirits of investors in Europe and contributed to the FTSE 100 index reaching a four-year high in London. However, the news was received with a more subdued response on Wall Street, where the majority of the main indexes only made modest gains.
Oxford Economics stated in a research note that the most recent CPI survey was “another small step in the right direction,” but they also stated that it was unlikely to prevent the Federal Reserve from continuing to raise interest rates as they work to combat inflation.
As a result of the conflict in Ukraine driving up energy costs and supply-chain concerns in the wake of the coronavirus epidemic continuing to push prices higher, the rate of inflation in the United States reached its highest level since 1982 in the month of June.
In spite of the decline, the rate of inflation is still more than three times higher than the annual goal rate of 2% that the Fed has set for itself, and it is anticipated that this level would stay excessive throughout 2023.
“While there are growing signs that inflation has peaked, the Fed is worried about the overheating labor market,” economists at Bank of America wrote this week. The latest CPI report is “unlikely to quell those concerns”, they concluded.
online sources: theguardian.com, bls.gov, oxfordeconomics.com, bankofamerica.com