US Consumer Prices Unchanged in December

“WASHINGTON (AP) — Lower gas costs offset more expensive food and higher rents to keep a measure of U.S. consumer prices flat last month.

The Labor Department said Wednesday that food prices increased 0.2 percent in December from November. Rents and airline fares also rose. Gasoline prices fell a seasonally adjusted 2.3 percent.

The flat reading of the December consumer price index ends a year when inflation slowed. Consumer prices rose only 1.7 percent in 2012, down from 3 percent in 2011. Food prices increased 1.8 percent, down from 4.7 percent in 2011. Energy prices rose slightly.

Excluding the volatile food and energy categories, core prices ticked up just 0.1 percent in December compared with November. And core prices rose only 1.9 percent in 2012. That’s below the Federal Reserve’s inflation target of 2 percent and it’s lower than 2011’s increase of 2.2 percent.

Mild inflation leaves consumers with more money to spend, which is good for the economy. Lower inflation also makes it easier for the Fed to continue with its efforts to accelerate the economy. If the Fed were worried that prices are rising too fast, it might have to raise interest rates.

With job gains and economic growth steady but modest, many businesses are reluctant to raise prices for fear of losing customers. That’s helped keep inflation tame. Workers also aren’t able to demand higher wages when growth is weak. That limits their ability to pay more.

Gas prices have fallen sharply in recent months after spiking this summer. Prices at the pump averaged $3.29 a gallon nationwide on Wednesday. That’s about the same as a month ago and well below summer prices that nearly touched $4 a gallon….”

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