Consumer prices rose faster than most workers' wages last year, as energy prices pushed inflation to the highest level in four years, the Labor Department said yesterday.
Americans paid 26.1 percent more for gasoline last month than they did a year earlier, as well as higher prices for food, housing, medical care, college tuition, recreation, and a variety of other goods and services.
Overall, the department's consumer price index, one of the most widely followed measures of inflation, was 3.3 percent higher in December than a year before. That was much faster than the 1.9 percent rate of inflation in 2003 and the highest since the 3.4 percent rate in 2000.
Workers' pay also rose last year -- but more slowly than prices. After adjusting for inflation, average hourly wages for production and non-supervisory workers fell 0.8 percent -- the first such decline since 1994, Labor figures show.
"Thus, any real income growth these families achieved last year was a function of more work at lower hourly wages," wrote Jared Bernstein, senior economist at the Economic Policy Institute, in an analysis of the data.
Many economists believe inflation, along with world oil prices, will ease somewhat this year.
Oil prices have already fallen to around $48 a barrel recently from a non-inflation-adjusted record above $55 a barrel in October. Gasoline prices have dropped to a national average of $1.82 for a gallon of regular from a high of $2.05 in May, according to the AAA auto club.
The CPI swung up and down montly last year, as energy prices fluctuated. It slid 0.1 percent in December, as energy prices dropped 1.8 percent.
The jump in oil prices last year was fueled primarily by rising global demand at a time of limited supplies. Traders bid prices higher as terrorist attacks, hurricanes and political turmoil in oil-producing countries disrupted, or threatened to disrupt, supplies.
The U.S. and global economies are forecast to expand more slowly this year, in part because of rising interest rates. That, in turn, would mean slower growth in demand for oil. If prices are not disrupted by unforeseen events -- a big wild card, to be sure -- oil prices should settle in the low $40s per barrel this year, several economists forecast.
Lower oil prices should cool inflation significantly. Consumer energy prices rose 16.6 percent last year, the biggest increase since an 18.1 percent jump in 1990 -- the year oil prices shot up after Iraq's invasion of Kuwait. The jump in energy prices last year accounted for more than a third of the rise in the overall CPI.
With lower oil prices, the CPI is forecast to rise by around 2 percent this year, by many estimates.
Because food and energy prices can swing so widely over time, economists often exclude them to get a better sense of underlying inflation. This so-called core inflation rate was tame last year.
The core CPI rose 2.2 percent in the 12 months ended in December. That is a comfortable level for many Federal Reserve policymakers, who believe the CPI overstates inflation.
