CPI Rises 0.1% in December, 2.4% in ’02

U.S. consumer prices rose at a modest pace in December, matching November’s increase, though for all of 2002 a jump in energy prices drove the overall inflation rate higher.

The Labor Department said Thursday that the consumer price index, the most widely watched gauge of inflation pressures, inched up a seasonally adjusted 0.1% in December, the same as November.

The pace of increase was 0.3% in October, but declines in clothing, auto and energy prices in the last two months of the year slowed the CPI’s advance.

For all of 2002, the CPI rose 2.4%, up from 1.6% in 2001. Energy prices rose for much of last year: The CPI’s energy component surged 10.7% in 2002, the government said.

Excluding volatile energy and food prices, the so-called core CPI rose 0.1% in December, down from 0.2% in November. For the year the core CPI was up 1.9%, compared with 2.7% in 2001 and matching the 1999 increase, which was a 34-year low.

“In the near term, the heavy discounting by retailers and the automakers are really dragging the overall indices down,” said Sharon Start, chief fixed-income market strategist for Legg Mason in Baltimore.

The annual index is used by some companies and government entities to set cost-of-living increases for workers and retirees.

However, Social Security recipients will receive a 1.4% increase in benefits this year. Their adjustment is tied to the change in a version of the CPI in the 12 months through September.

In a separate report, the government said new claims for state unemployment benefits unexpectedly dropped to their lowest level since November in the week ended Jan. 11.

They dipped by 32,000 to a seasonally adjusted 360,000 in the week, down from a revised 392,000 in the prior week.

Though the level was much lower than what Wall Street economists had been expecting, a labor analyst said that adjustments intended to deal with seasonal fluctuations in claims may have had a downward effect on the numbers.

Still, the claims level was the lowest in six weeks.

The decline brought the four-week moving average of claims, considered by some analysts to be a more reliable indicator of trends, to 387,500, down from 407,000 in the prior week.