The Labor Department stated its Consumer Price Index fell 0.1 percent after being unchanged in November. Economists had expected the CPI remaining unchanged last month and increasing 0.8 percent from a year ago. The 0.7 percent gain in consumer prices in 2015 was the second smallest December-December gain in the last 50 years. The core CPI, not including food and energy costs, moved higher 0.1 percent after advancing 0.2 percent for three straight months. In the 12 months through December, the core CPI spiked 2.1 percent, the largest gain since July 2012, after advancing 2.0 percent in November.
The Fed, which has a 2% inflation target, tracks a price measure that is running well below the core CPI. The Fed increased its benchmark overnight interest rate in December by 25 basis points to between 0.25% and 0.50%, the first hike in almost a decade.
Last month, energy prices declined 2.4%, with gasoline falling 3.9%. Energy prices dropped 1.3 percent in November, while gasoline decreased 2.4%. Owners’ equivalent rent of residences increased 0.2% after a similar gain in November. Also, medical care costs inched higher 0.1 percent, slowing from a 0.4% gain in November.
Apparel prices dropped 0.2%, falling for a fourth consecutive month. Prices for new motor vehicles fell 0.1%, reversing the prior month’s increase. Building permits dropped 3.9% to a 1.23 million-unit rate last month, dragged down by an 11.4% tumble in permits for multi-family buildings. Lastly, permits for the construction of single-family homes increased 1.8% last month.