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US CPI Negative, Core Flat, Consumer Sentiment Soars

Posted by Joseph Trevisani on Jan 16, 2015 11:57:00 AM

American consumer prices fell in December for the second straight month as tumbling energy costs pushed annual inflation below 1 percent for the first time since the recession. 

The consumer price index slipped 0.4 percent on the month as forecast, the largest decline in six years following a 0.3 percent decline in November, according to the Labor Department in Washington today. It was the first back to back decreases since March and April 2013.

The core inflation rate, excluding food and energy items, was flat in December, less than the 0.1 percent forecast and only the second non-positive month in five years. 

Annual inflation retreated to 0.8 percent in December, down 0.5 percent in a month, the first reading below 1.0 percent and the smallest annual increase since October 2009.  

Core inflation came in at 1.6 percent in December, just weaker than the 1.7 percent estimate, after November's 1.7 percent pace and the lowest since the same score in February last year and June 2011.

Consumer confidence surged in January to the strongest level in 11 years. The good feelings likely prompted by plunging gasoline prices and steady gains in the labor markets. 

The University of Michigan preliminary consumer sentiment index for January rose to 98.2 from 93.6 the prior month for the highest reading since January 2004. Analysts had predicted a slight improvement to 94.1. 

Energy costs declined 4.7 percent in December. Pump prices have fallen 44 percent in less than a year. Yesterday a gallon of regular gasoline cost an average of $2.08 across the country, according to the American Automobile Association, down from a high of $3.70 last April and the lowest since May 2009.

The gauge of current conditions jumped to 108.3 in January from 104.8 prior. It was the most optimistic the American consumer has been in 11 years. The index for ‘personal expectations and the overall economy' climbed to 91.6 from 93.6, the most assertive the U.S. consumers have been about their future in eight years. 

A report from the Federal Reserve showed that industrial production fell 0.1 percent in December, down from a 1.3 percent gain in November.

Activity in the manufacturing sector slowed, sliding to a 0.3 percent increase from November’s upwardly revised 1.3 percent gain, as American factories lowered output to adjust for weakening overseas demand and a stronger dollar. 

Utility output dropped 7.3 percent in Decenter following a 4.2 percent gain in November. It was the biggest drop since January 2006. 

The percentage of the U.S. industrial plant in operation in December also dropped in December. Though capacity utilization fell to 79.7 percent from November’s downwardly revised 80.0 score, it remained the highest useage since April 2008. Economists had predicted at smaller drop to 79.9 percent. 


Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Bloomberg

cpi jan 16

cpi annual jan 16

cpi core jan 16

ip jan 16

sentiment jan 16


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