The cost of living in the U.S. declined in December by the most in six years, reflecting a plunge in energy costs that’s keeping inflation from rising toward the Federal Reserve’s goal. The consumer-price index dropped 0.4 percent, the biggest decline since December 2008, after falling 0.3 percent in November.
The biggest drop in clothing costs since 1998 combined with falling air fares and cheaper new and used cars signal the deceleration in inflation is spreading beyond energy as Japan and Europe are in or near a recession and some emerging markets cool. Overall consumer prices rose 0.8 percent in the 12 months ended in December, the smallest year-to-year gain since October 2009. They were up 1.3 percent the prior month. The core measure increased 1.6 percent from December 2013 after climbing 1.7 percent.
Also consumer confidence jumped in January to the highest level in 11 years as steady job gains and plunging gas prices brightened the outlook for U.S. households. Consumer sentiment index rose to 98.2, the highest since January 2004, from a final reading of 93.6 in December. The median estimate of 70 economists projected an increase to 94.1.
Trips to the pump that are costing less and less and job gains that have accelerated are helping Americans feel more optimistic about the economic recovery. Continued gains in confidence combined with stronger wage growth will be needed to embolden consumers to go out and spend their savings on purchases from vehicles to homes.
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