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Economic Watch: Inflation Tame, Overall Conditions Improving

Despite the biggest jump in consumer prices in six months and the first hike in wholesale prices in three months, inflation remains tame, according two new reports.

Evan Lockridge
Evan LockridgeFormer Business Contributing Editor
January 16, 2014
Economic Watch: Inflation Tame, Overall Conditions Improving

 

3 min to read


Despite the biggest jump in consumer prices in six months and the first hike in wholesale prices in three months, inflation remains tame, according two new reports.

The Consumer Price Index, which measures inflation, increased 0.3% in December from the month before, following no increase in November compared to October, according to the U.S. Commerce Department.The December hike was due in large part to a 3.1% increase in gasoline prices.

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Core prices, which remove the volatile food and energy sectors, increased just 0.1% in December from the month before.

This puts the nation’s overall inflation rate for 2013 at 1.5%, well below the Federal Reserve’s target of 2% or less. Core prices increased 1.7% during the same time period.

“Thanks to upward costs in fuel and housing, consumer prices rose more than expected at the end of 2013,” said Lindsey Piegza, chief economist at the investment firm Sterne Agee. “This was the biggest monthly gain since June and will certainly help ease concerns at the Fed of a continued decline in inflation. Although a minimal rise, many committee members will argue this as evidence inflation is reversing course back towards the Federal Reserve's target, further justifying a reduction in monthly bond purchases at a faster pace.”

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Meantime, a separate report from the U.S. Labor Department, shows prices at the wholesale level in December increased 0.4%, the first hike in three-months. When food and energy prices are removed, the December increase was 0.3%, the biggest gain since July 2012. Much of the overall increase was due to hikes in fuel and tobacco prices.

The Producer Price Index increased 1.2% for all of 2013, the smallest yearly increase since 2008, while the increase was 1.4% when food and energy prices are removed.

A third report, released Wednesday by the U.S. Federal Reserve, says the U.S. economy grew at a moderate pace in the last few weeks of 2013.

The “beige book,” which describes economic conditions across the central bank's 12 districts, said, "The economic outlook is positive in most districts, with some reports citing expectations for 'more of the same' and some expecting a pick-up in growth.”

“Reports on transportation services were generally positive,” according to the report. “Port activity remained strong in the Richmond District. Logistics contacts in the Atlanta District reported expansion in the movement of industrial and healthcare-related goods. Rail contacts noted year-over-year increases in intermodal traffic in the Atlanta District and heightened cargo volumes in the Dallas District.”

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The Fed also noted, freight transportation executives in the Cleveland District reported that shipping volume was in line with or exceeded expectations. “One contact in the Philadelphia District observed ‘booming’ growth for most modes of transportation. In contrast, transportation companies in the Kansas City District reported a slight decrease in business activity in recent weeks, while both intermodal cargo volumes and air cargo volumes fell in the Dallas District.”

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