Consumer inflation in 1997 at 11-year low (EXCERPT), Monthly Labor Review Online, May 1998

Consumer inflation in 1997 at 11-year low

Todd Wilson

The Consumer Price Index for All Urban Consumers (CPI-U) All Items for the U.S. city average increased 1.7 percent in 1997, down from a 3.3-percent advance during the prior year.¹ The 1997 rise was the smallest annual increase since the 1.1-percent advance in 1986, when oil prices collapsed. A combination of declining energy prices and moderating food inflation contributed to last year’s relatively low consumer inflation. Lower prices for consumer energy followed falling world crude oil prices, as oil supplies outpaced usual demand, and as demand for oil turned out to be weaker than expected. Decelerating food inflation accompanied decreasing prices for animal feed and wheat.
The CPI-U excluding food and energy prices (often called the core CPI-U) increased 2.2 percent, the smallest calendar-year rise in 32 years. Decreasing commodities prices across a wide variety of items, including new and used cars and housefurnishings, contributed to the slowdown in inflation in 1997. Commodities prices, subject to greater global competition than those for services, rose just 0.2 percent. Within commodities, prices for durable goods decreased 1.5 percent; nondurable goods increased 0.8 percent. Services fees, which increased 2.8 percent in 1997, decelerated as well, although not nearly as much as did commodities prices. (See table 1.)

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Footnotes

1 Annual percent changes are December to December, unless otherwise noted.

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