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Consumer prices driven higher by gasoline

By Ben Rooney, staff reporter

NEW YORK (CNNMoney.com) -- Consumer prices rose in 2009 as gasoline prices were more than 50% higher from 2008's depressed levels, the government said Friday.

The Consumer Price Index, the government's key inflation reading, rose 2.7% during the past 12 months. That compares with a 0.1% rise for 2008.

The increase was due to higher gas prices, which rose 53.5% over the last year after declining 43.1% in 2008.

Food prices fell 0.5% last year after climbing 5.9% in 2008. It was the first December-to-December decline since 1961.

The so-called core CPI, which is more closely watched by economists because it excludes volatile food and energy prices, was up 1.8% over the past year, the same increase as in 2008.

December numbers. Overall prices rose 0.1% last month, driven by a sharp rise in prices for used cars and trucks. But the gain was smaller than the 0.2% rise Economists surveyed by Briefing.com had forecast.

The core CPI also increased 0.1% in the month, which matched economists' expectations. Core prices were held in check as housing costs, which make up 40% of the index, were unchanged from November.

"Core inflation was held down by housing prices," said Mark Vitner, an economists at Wells Fargo Securities. "That's likely to continue because housing is in over supply."

However, prices outside of housing, energy and food are now going up at the fastest rate since 1982, according to Vitner.

Gas prices were up 0.2% last month after increasing 6.4% in November. Food prices also rose 0.2% in December after rising 0.1% in each of the previous two months.

"The overall and core CPI were both well behaved in December," Vitner said. But despite the modest monthly increases, there are some "trouble spots beneath the surface," he warned.

"After falling through much of 2009, food prices have begun to trend higher," Vitner said. "Energy prices are also up on year-to-year basis and will no longer constrain inflation." To top of page

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