Energy costs inflate price index

? Consumer prices barely budged in December and closed out a year in which costs other than energy rose by the smallest amount since 1964.

The generally tame inflation climate in 2002 offered some shoppers — especially those buying cars, clothes, computers and airline tickets — some good deals because prices fell for those items.

But people paying energy, medical and education expenses, including tuition and books, took a hit in the wallet as those prices rose sharply.

Energy prices, which can fluctuate wildly from year to year, rose by 10.7 percent in 2002, a turnaround from the 13 percent drop registered in 2001.

Still, Thursday’s report on the Consumer Price Index, the government’s most closely watched inflation gauge, merely confirmed what Federal Reserve Chairman Alan Greenspan was saying all last year: inflation isn’t a problem for the economy. Many companies have limited power to raise prices given the uneven economic recovery, economists said.

Consumer prices rose a mere 0.1 percent in December from the previous month, marking the second month in a row that prices went up by that amount, the Labor Department reported. December’s showing marked a better reading on inflation than the 0.2 percent rise economists were forecasting.

For all of 2002, consumer prices rose by 2.4 percent, up from the 1.6 percent increase in 2001.

But most of that pickup came from rising energy costs, including gasoline, which moved higher on tensions in the Middle East and worries about supply disruptions if the United States went to war with Iraq.

Excluding energy prices, consumer prices went up by just 1.8 percent in 2002. That was the smallest increase since a 1.3 percent rise in 1964, and down from a 2.8 percent increase in 2001.

“If you have the means and the attitude to spend, you don’t have to hunt too long to find a good bargain,” said Carl Tannenbaum, chief economist at LaSalle Bank. “Discounting is heavy and financing incentives are common.”