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US consumer prices edge up

WASHINGTON, Jan 15 – US consumer prices rose 0.1 percent in December, pushing the inflation rate up 2.7 percent in 2009 from a year ago, official data showed on Friday signaling sluggish recovery from recession.

The small rise in the consumer price index (CPI) was matched by a 0.1 percent increase in the so-called "core" CPI, which excludes food and energy prices, the Labor Department reported in seasonally adjusted data.

The headline CPI increase was weaker than the average analyst forecast of a 0.2 percent rise, while the core reading was expected.

"The US is still in the grip of intense disinflationary forces, despite the basis effect lifting the headline year-on-year rate. Deflation risk is real," said Ian Shepherdson, chief US economist at High Frequency Economics.

Energy prices pulled the 2009 inflation rate to 2.7 percent, marking a sharp increase over 0.1 percent inflation in 2008, the first full year of the downturn since the Great Depression.

In December 2007, the annual inflation rate stood at 4.1 percent as the world\’s largest economy officially entered recession.

The Labor Department said energy prices surged 37.5 percent in 2009, the sharpest rise since 1979.

Gasoline prices leapt 53.5 percent, an all-time record gain in the data series that began in 1937.

Food prices fell 0.7 percent over the year, the steepest decline since 1961.

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Core annual inflation was 1.8 percent, within the Federal Reserve\’s comfort zone on monetary policy.

The Fed said on Wednesday in its Beige Book report on the economy that because of the high level of unemployment, wage pressures were "subdued" and overall inflationary pressures modest.

The US economy expanded at a 2.2 percent pace in the third quarter of 2009, after four quarters of contraction. The government is set to release its initial estimate of fourth-quarter gross domestic product on January 29.

The Fed and most economists expect data to show continued growth in the fourth quarter and into 2010 but worry that high unemployment will curb consumer confidence and spending.

The jobless rate held at 10 percent in December while 85,000 jobs were cut, highlighting the sluggish pace of recovery from the deepest recession in decades.

US retail sales fell unexpectedly, by 0.3 percent, in December, capping the worst year on record, the Commerce Department reported on Thursday.

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