Consumer Prices Drop due to Lower Gas Costs

A sharp drop in gasoline prices led to decline in consumer prices last month. It kept the inflation mild according to the Labor Department Friday. Gas prices dropped 7.4 percent, which is the biggest drop in almost four years. It offset the 0.2 percent increase in food prices.
 Consumer Prices

The seasonally adjusted Consumer Price Index declined 0.3 percent in November from the previous month. According to another report, the Federal Reserve said that factory output went up 1.1 percent in November from October as factories rebounded from the effects of Hurricane Sandy. A drop of 1 percent in the output of the previous month was in part due to the hurricane.

Auto production increased 4.5 percent last month, which was the first increase since July. Production of primary metals, wood products, electrical equipment, and appliances also increased. The total industrial output at factories, utilities and mines went up 1.1 percent last month after it dropped 0.7 percent in October.

According to the consumer price report, prices went up 0.1 percent in November. This excluded the volatile gas and food categories. Core prices went up 1.9 percent in the last year, which is below the Federal Reserve’s annual goal of 2 percent.

Higher prices of rent, new cars, and airline fares pushed up the core prices last month. The cost of used cars and clothing dropped. Analysts said that inflation is not a problem Lower inflation is an advantage for households that deal with limited income growth.

High unemployment and slow wage growth made businesses reluctant to increase prices because it could drive away customers. This helped keep inflation tame. Gas prices dropped in the last two months after increasing in the late summer. Last Friday, a gallon of gas cost an average of $3.29 across the nation. That was 15 cents less compared to a month ago.

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