The Labor Department reported Thursday that consumer prices rose by 2.5 percent in 2006, the best showing since prices had increased by just 1.9 percent in 2003. The improvement came in spite of the fact that consumer prices jumped 0.5 percent in December, as gasoline prices staged a momentary rebound.
In other economic news, the number of newly laid off workers filing claims for unemployment benefits fell to a seasonally adjusted 290,000 last week, the lowest level in 11 months and an indication that the labor market began the new year in good shape in spite of weakness in housing and auto manufacturing.
Meanwhile, the Commerce Department reported that construction of new homes rose by 4.5 percent in December to a seasonally adjusted annual rate of 1.642 million units, raising hopes that the worst of the housing slowdown may be coming to an end.
The 0.5 percent December increase in consumer prices had been expected, given that gasoline costs rebounded during the month. However with crude oil prices setting 19-month lows in recent weeks, the expectation is that gasoline costs will resume their downward trend and stay well below the record level of over $3 per gallon, set last summer.
For all of 2006, energy costs rose 2.9 percent, a significant slowdown after an increase of 17.1 percent in 2005 and 16.6 percent in 2004. That price moderation occurred in recent months. After advancing at a 22.8 percent annual rate in the first six months of 2006, energy costs fell at a 13.4 percent rate in the final half of the year.