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Plunging Gasoline Prices Lead To First U.S. Consumer Price Drop In Nine Months

gas pump

U.S. consumer prices inched down by 0.1 percent in December, due to a sharp decline in gasoline futures, the U.S. Bureau of Labor Statistics said on Friday, reporting the first drop in consumer prices in nine months.

The Consumer Price Index (CPI) declined by 0.1 percent in December on a seasonally adjusted basis after being unchanged in November, the U.S. Bureau of Labor Statistics said.

The drop in the all items index was the result of a sharp fall in the gasoline index which plunged by 7.5 percent last month, more than offsetting increases in several indexes including shelter, food, and other energy components.

The energy index declined by 3.5 percent in December, after a 2.2-percent drop in the previous month. The gasoline index, for its part, plunged in December following a 4.2-percent drop in November, the Bureau of Labor Statistics said.

Gasoline prices started to drop shortly after oil prices began to collapse at the end of last year, when both the U.S. and international benchmarks, WTI Crude and Brent Crude, respectively, plunged by 40 percent between October and December.

Over the past 12 months, the energy index dropped by 0.3 percent for the first 12-month decline in the energy index since the period ending September 2016, according to the Bureau of Labor Statistics. Over the past year, the gasoline index fell by 2.1 percent, more than offsetting increases in the other component indexes. In 2018, the gasoline index fell 2.1 percent after rising in 2016 and 2017, more than offsetting increases in other energy component indexes.

The drop in international crude oil prices resulted in the cheapest New Year national gas price average in three years, according to AAA.

As of January 7, the national gas price average was US$2.24 and had declined for 12 consecutive weeks, AAA said earlier this week. The national average was three cents cheaper on the week, 20 cents cheaper than last month and 25 cents cheaper year-over-year.

By Tsvetana Paraskova for Oilprice.com

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