U.S. consumer prices jump in December

But the overall increase in 2006 was the mildest in three years

updated 8:53 a.m. ET Jan. 18, 2007

WASHINGTON - After two years of being battered by soaring energy costs, Americans got a bit of a reprieve in 2006, which helped restrain overall inflation to the lowest increase in three years.

The Labor Department reported Thursday that consumer prices rose by 2.5 percent in 2006, the best showing since prices had increased by just 1.9 percent in 2003. The improvement came in spite of the fact that consumer prices jumped 0.5 percent in December, as gasoline prices staged a momentary rebound.

The 0.5 percent December increase in consumer prices had been expected, given that gasoline costs rebounded during the month. However with crude oil prices setting 19-month lows in recent weeks, the expectation is that gasoline costs will resume their downward trend and stay well below the record level of over $3 per gallon, set last summer.

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For all of 2006, energy costs rose 2.9 percent, a significant slowdown after an increase of 17.1 percent in 2005 and 16.6 percent in 2004. That price moderation occurred in recent months. After advancing at a 22.8 percent annual rate in the first six months of 2006, energy costs fell at a 13.4 percent rate in the final half of the year.