The Consumer Price Index-based retail inflation for December came in at a 14-month low of 4.59 per cent, down from 6.93 per cent in November, due to lower food inflation, showed official data released on Tuesday.
The inflation based on Wholesale Price Index (WPI) was 1.55 per cent in November 2020, and 2.76 per cent in December 2019.
Amid a still-tentative economic recovery, CPI rose 0.4 per cent in December, seasonally adjusted, in line with analysts' forecasts, accelerating from the 0.2 per cent increase in November, according to the report. But while core inflation softened marginally, fuel inflation went up in December.
Commenting on Wednesday's CPI report, Ian Shepherdson at Pantheon Macroeconomics pointed out how used auto prices were nevertheless running at an annual clip of 10%, that a weaker dollar might be feeding into fashion prices and that the downtrend in rent inflation "will not last much longer". This could be reflective of mild improvement in demand conditions on one hand and rising input prices on the other.
Food contributed 59.1% to the total inflation. The recent upward move in crude prices can be a potential dampener. Health inflation also rose to 6.0% from 5.6%. "That said, inflation softened in idiosyncratic categories, i.e. personal care and effects (to 11.7% from 12.0%) and transport and communication (to 9.3% from 11.1%)", the rating agency noted.
The rate of inflation based on WPI Food Index decreased from 4.27 per cent in November 2020, to 0.92 per cent in December 2020.
The US economy saw little inflation in 2020 amid the disruptions caused by the coronavirus pandemic, with the final month of a year seeing only a slight increase as gasoline prices rose, according to government data released on Wednesday.