January 20, 2016 8:40 AM, EST

Consumer Prices Fall, Led by Slump in Commodities

David Paul Morris/Bloomberg News

The cost of living in the United States dropped in December, led by a slump in commodities that’s roiling global markets.

The consumer-price index declined 0.1% after being little changed in November, a Labor Department report showed Jan. 20. The median forecast in a Bloomberg News survey of economists called for a 0.1% increase. Excluding food and fuel, the so-called core index rose 0.1%, less than forecast and the smallest gain in four months.

The unabated plunge in energy prices has kept inflation under wraps even as a tighter labor market provides impetus for a pickup in wage growth. Federal Reserve officials are betting prices will accelerate as they consider further increases in the benchmark interest rate.

There’s “ongoing downward pressure on goods prices stemming from lower oil and global headwinds,” said Harm Bandholz, chief U.S. economist at UniCredit Bank AG in New York.

Core consumer prices were projected to rise 0.2% according to the median forecast in the Bloomberg survey of economists. Estimates ranged from little changed to a 0.3% advance.

For all of 2015, consumer prices climbed 0.7% after rising 0.8% in 2014. It was the smallest advance since 2008.

Excluding food and energy, they rose 2.1% last year after a 1.6% increase in 2014.

Energy costs decreased 2.4% in December, capping a 12.6% drop for all of 2015, the report showed. Food costs decreased 0.2% last month compared with November.

The advance in the core index was restrained by declining prices for clothing, airline fares, hotel room rates and new cars. Rent increases also moderated.

Energy prices continue to slide, helping to support consumer buying power. The average cost of a gallon of regular gasoline was $1.88 on Jan. 18, the cheapest in almost seven years, according to AAA, the biggest U.S. auto group. That compares with an average $2.40 in 2015.

Fed officials, who raised the benchmark interest rate in December for the first time since 2006, are pinning plans for further increases in part on a rebound in inflation. The central bank’s preferred price-growth gauge is the Commerce Department’s personal consumption expenditures measure, which hasn’t met the Fed’s 2% goal since April 2012.

The CPI is the broadest of three price gauges from the Labor Department because it includes all goods and services. About 60% of the index covers prices consumers pay for services from medical visits to airline fares, movie tickets and rents.

The Labor Department’s gauge of wholesale prices, which includes 75% of all U.S. goods and services, decreased 0.2% in December. A separate report showed the cost of imported goods fell 1.2% last month, the biggest decrease since August.