Arrow-right Camera
The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Consumer prices down after increases

Associated Press

WASHINGTON — A surge in the cost of gasoline and other energy products pushed consumer prices up by 3.3 percent in 2004, the biggest jump in four years, but relief may be on the way. Consumer prices actually dipped in December as energy costs moderated.

The Labor Department reported Wednesday that its closely watched Consumer Price Index edged down 0.1 percent last month, reflecting the biggest drop in energy prices since July.

The 3.3 percent increase in prices for all of 2004 was the biggest jump since a 3.4 percent rise in 2000. It represented a significant acceleration from a moderate 1.9 percent rise in consumer prices in 2003.

Price pressures last year were dominated by a 16.6 percent surge in fuel bills, the biggest jump in 14 years, as gasoline prices jumped by 26.1 percent, natural gas was up 16.4 percent and home heating oil rose by 39.5 percent.

Those hefty price increases, reflecting turmoil in global oil markets, caused a major slowdown in economic activity in the late spring as consumers, struggling to pay higher energy bills, suddenly stopped spending on other items.

Forecasters, however, believe that overall inflation will moderate significantly this year if crude oil prices, which hit a record $55 per barrel in October, fall back to below $40 per barrel by the end of this year. However, they concede that is a big if, given the high potential for further violence in the Middle East aimed at disrupting oil supplies in such hot spots as Iraq and Saudi Arabia.

“All we need is some event out there to occur and gum up the works,” said Nariman Behravesh, chief economist at economic consulting firm Global Insight. “Oil is the big wild card.”

The news on inflation was one of a number of encouraging reports released Wednesday depicting an economy moving forward at a brisk pace at the end of last year and heading into 2005.