According to recent reports, U.S consumer prices edged downward in December, for the first time in more than 2-1/2 years. Declining prices for gasoline and other goods may be indicators that inflation is now on a sustained, downward trend.
The consumer price index (CPI) dipped 0.1% last month–the first decline since May 2020, when the economy was impacted by the first wave of COVID-19 infections. Meanwhile, according to data from the U.S. Energy Information Administration, gasoline prices fell 12.5% last month. Prices for used cars and trucks are also declining as the supply of motor vehicles improves. Ebbing demand has left retailers holding excess merchandise, forcing them to offer discounts for products like apparel and furniture.
Price pressures are subsiding as the U.S. central bank’s fastest monetary policy tightening cycle since the 1980s dampens demand, and bottlenecks in the supply chains ease.
However, services prices haven’t eased. Rising rents account for part of that sustained increase, but even taking rents out of the equation, services inflation continues, reflecting still-strong wage growth.
