CPI Details

As noted, the plunge in energy costs led the way last year.  Overall energy costs were down 21.3% during 2008, the largest decline since such recordkeeping began in 1958.  Prices at the pump fell 43% last year, the largest decline since 1937.

Many other prices were soft as well. Average new car prices declined 3.2% last year, the largest drop since 1971. Food and beverage costs rose 5.8% last year, while apparel prices fell 1.0%.  Medical care costs rose 2.6%.

The “core” CPI, which excludes volatile food and energy prices, was unchanged during December, matching November’s result.  Core prices rose 1.8% during 2008, the smallest rise since 2003.

Wholesale Prices

Of concern was the actual 0.9% decline in the Producer Price Index (a measure of wholesale prices) during 2008. Such prices declined at a 24.3% annual rate during 2008’s fourth quarter.  The decline followed a worrisome 6.2% rise in such prices during 2007.