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Consumer Prices Fall First Time in 16 Months

By September 18, 2014News

U.S. consumer prices dipped in August for the first time in 16 months, due to a decline in the cost of gasoline, the government reported. A decrease at the gas pump gives relief for many, but only a temporary offset as the prices of groceries has risen.

The consumer price index, a closely watched inflation measure, dipped 0.2% last month, according to a report from the U.S. Labor Department. The findings should serve to ease pressure on the Federal Reserve policymakers.

Last month, gas prices fell 4.1 percent and airline fares were down 4.7 percent. Household furnishings, apparel, used cares and recreation all saw prices decline. Food prices rose 4.2 percent, which is the largest increase since November 2003. In the past 12 months, food prices have seen a 2.7 percent increase due to droughts in the Western U.S.

Lower inflation has given households a short-term boost by stretching paychecks, so to speak. Inflation-adjusted hourly wages increased 0.4 percent last month, the largest gain since late 2012. Despite this, wages have only risen a stingy 0.4 percent in the past 12 months. Economists believe wages will need to increase at a higher pace in order for the U.S. to see real growth.

Overall, inflation has plateaued recently after a sharp rise early in 2014 on increased food and energy costs. Speculation has eased that the Federal Reserve could seek to raise interest rates sooner than the 2015 timetable that finance markets forecast.

The Fed, which is set to end its bond purchasing stimulus program in October, has said it expects low interest rates to continue for “a considerable time” after the program concludes.

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