Consumer Prices Steady And Moderate

A swing lower for energy costs pulled down headline consumer prices in December which, at the core rate, were steady and moderate. The CPI slipped an as-expected 0.1 percent on the month with the year-on-year rate down 3 tenths to end 2018 at 1.9 percent, also as expected. The ex-energy ex-food core rate also came in at expectations, up 0.2 percent for a 2.2 percent rate which is unchanged from November.

Energy fell 3.5 percent in December as gasoline prices dropped sharply for a second straight month, down 7.5 percent. Transportation costs in general slipped as airfares continued their decline, down 1.5 percent on the month following a 2.4 percent drop in November. Vehicle insurance also fell for a second straight month, slipping 0.2 percent after November's 0.5 percent decline.

Housing and medical costs make up just more than half of the total CPI and here the results are also steady, up 0.4 percent for the former and 0.3 percent for the latter. Yet rent and also owners' equivalent rent, which measures the costs of owning a home, were both soft at only 0.2 percent gains but contrast with a 2.7 percent jump in away from home costs. Physician services were flat in the month and rose only 0.6 percent in 2018. In contrast, hospital services rose 0.5 percent for a second straight month for a yearly gain of 3.7 percent.

Other readings include a 0.4 percent monthly increase for food which, however, rose only 1.6 percent on the year in 2018. Apparel costs were flat in December which doesn't point to much acceleration for dollar sales at apparel stores during the holidays. And wireless telephone services, which have been the source of volatility in prior years, extended a long series of declines in December to end the year 3.2 percent lower.

The turn lower for overall prices may, based on the ongoing rebound in oil prices, firm back slightly in the next report for January, yet price pressures at the consumer level remain tame and are not raising any urgency for Federal Reserve rate hikes.