U.S. Prices Drop for First Time Since May 2020; Inflation Rate Falls to 6.5%

Maybe it wasn’t much, but it was a signal that inflation could be easing.

According to statistics released by the U.S. Labor Department Thursday, consumer prices in December posted their biggest monthly decline since early in the pandemic..

The consumer price index, which tracks costs of a wide variety of goods and services, fell 0.1% for the month. It’s the largest month-over-month decrease since April 2020, when the COVID pandemic had begun its grip on the U.S. economy.

Even with the decline, headline CPI rose 6.5% from a year ago, the smallest annual increase since October 2021, according to CNBC, which also reported:

  • A steep drop in gasoline was responsible for most of the monthly decline. Prices fell by 9.4% for the month and are now down 1.5% from a year ago after surging past $5 a gallon in mid-2022.
  • Fuel oil fell 16.6% for the month, also contributing to a total 4.5% decline in the energy index.
  • Food prices increased 0.3% in December while shelter also saw another sharp gain up 0.8% for the month and now 7.5% higher from a year ago.
  • Used vehicle prices were off 2.5% for the month and are now down 8.8% year over year, according to the CNBC report.
  • Medical care services increased 0.1% after dropping for two straight months, while apparel prices rose 0.5% and transportation services were up 0.2% and are still 14.6% higher from a year ago. However, airline fares fell 3.1% for the month though are still up 28.5% from a year ago.

“Inflation is quickly moderating. Obviously, it’s still painfully high, but it’s quickly moving in the right direction,” Mark Zandi, chief economist at Moody’s Analytics, told CNBC. “I see nothing but good news in the report except for the top-line number: 6.5% is way too high.”