Last week, the BLS released the Consumer Price Index (CPI) for December 2014. Overall, the CPI dropped 0.4 percent in December, largely driven by the 9.4% drop in gasoline prices. Core CPI, which excludes food and energy prices was flat during December.

The graph below shows one year growth rates in the seasonally adjusted CPI series.  Over the last twelve months the CPI increased just 0.66 percent, down from 1.23% the month before.

The large decline is still mainly due to decreasing energy prices, including gasoline and oil. The energy index fell by 10.6 percent in the past year. Perhaps cold weather could stem this decline by increasing the demand for energy.

But while gas prices are falling, food prices are moving in the opposite direction. Food prices climbed by 3.4% last year, their largest annual increase in three years.

The table below shows the price change for selected goods and services in the past twelve months:

Notice:

• Maybe you should buy your butter now.  The price of butter is still climbing quickly, rising "only" 22.5% in December, down from the 29.8% increase in October.
• Textbook prices rose at 5 percent.  So that what a student could get for $150 last year, now costs $157.5.  Perhaps the new textbooks are better than the old ones.
• The price change of hot dogs doubled. In November the increase was only at 6.0%, but in December, it was 12.1 percent.