Inflation Slowdown Complicates Fed’s Task

Prices rise more slowly for goods ranging from autos to healthcare.

Five years into the U.S. economic expansion, inflation shows little sign of picking up as prices rise more slowly for goods and services from automobiles to medical care, complicating the Federal Reserve’s drive to guide the economy away from the precipice of deflation.

The personal consumption expenditures price index, minus food and energy costs, rose 1.2 percent in 2013, matching 2009 as the smallest gain since 1955. Of 27 categories of goods and services in the gauge, 18 showed smaller price increases over the past two years, according to data compiled by Bloomberg.

Transitory Factors

“Some of the recent softness reflects factors that seem likely to prove transitory, including falling prices for crude oil and declines in non-oil import prices,” Yellen said in testimony yesterday before the House Financial Services Committee.

More Widespread

There are indications that disinflationary pressures are becoming more widespread in the economy. A measure of the distribution of inflation by the San Francisco Fed shows that 20.5 percent of expenditures it tracks had lower prices in December 2013 than a year earlier. That’s almost double the 11.7 percent it found for the 12 months ended in December 2012. The number of items with lower prices was 36 percent of the total in December 2013, compared with 22.2 percent a year earlier.

New Apartments

“Rents are going to continue to go up, but the pace of that growth is going to slow,” Langbaum said. “The driving factor behind all that is there’s been an influx of new apartment supply,” which will help keep a lid on rents this year.

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