U.S CPI Falls on Fuel Slump

The cost of living in the U.S. fell in January by the most in six years, led by a plunge in energy prices that so far isn’t spreading to services.
The consumer-price index declined 0.7 percent after dropping 0.3 percent in December, a Labor Department report showed Thursday in Washington. The median forecast of economists surveyed by Bloomberg called for a 0.6 percent decrease. Excluding volatile food and fuel, the so-called core measure rose 0.2 percent, more than projected.

The core reading was propelled by gains in services such as rents and hotel rates that support the Federal Reserve’s view that total inflation will eventually return toward their 2 percent goal once the plunge in fuel costs abates. At the same time, cheaper energy is freeing up money for Americans to spend elsewhere, helping to sustain demand and underpin growth.

For consumers, the drop in energy costs “is generally good as it increases their purchasing power,” Josh Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, said before the report. “The Fed’s going to look at the numbers and say, ‘we expected it.’”

Bloomberg