Consumer Prices in US Increased 0.3% in October
Nov. 18 (Bloomberg) -- The cost of living in the U.S. rosemore than forecast in October as Americans paid more for fuel,while so-called core prices held at a pace that supports theFederal Reserve’s forecast for tame inflation.
The 0.3 percent rise in the consumer-price index followed a0.2 percent increase in September, figures from the LaborDepartment showed today in Washington. Excluding food and energycosts, the core index rose 0.2 percent for a second month.
Unemployment at a 26-year high of 10.2 percent and wagesthat were down 5.2 percent in September from a year earlier aregiving companies such as Wal-Mart Stores Inc. little room toraise prices. Fed Chairman Ben S. Bernanke said Nov. 16 that theeconomic “headwinds” will limit the recovery, allowinginterest rates to stay low for an “extended period.”
“I don’t see anything in the report that suggests there’sany real inflation flare-up,” said Joseph LaVorgna, chief U.S.economist at Deutsche Bank Securities Inc. in New York. “TheFed is comfortably on hold.”
Economists forecast the consumer price index would rise 0.2percent, according to the median of 78 projections in aBloomberg News survey. Estimates ranged from a decline of 0.2percent to a rise of 0.5 percent.
The core index was forecast to rise 0.1 percent, accordingto the Bloomberg survey.
Housing Starts Fall
U.S. stock-index futures erased gains after the CommerceDepartment said housing starts unexpectedly plunged 11 percentlast month to the lowest level since April. Futures on theStandard & Poor’s 500 Index were down 0.1 percent to 1,106.0 at9:02 a.m. after rising as much as 0.3 percent.
Treasuries remained lower after the consumer price reportand before the U.S. announces tomorrow the amounts of 2-, 5- and7-year notes it will sell next week. The 10-year note yield rosetwo basis points to 3.34 percent at 8:35 a.m. in New York.
Compared with a year earlier, consumer prices were down 0.2percent. Core prices rose 1.7 percent from October 2008 after a1.5 percent year-over-year gain in September.
Energy costs increased 1.5 percent in October, led by fueloil and gasoline.
The year-over-year declines in the consumer price index aregetting smaller as crude oil prices increase from an almostfive-year low in December 2008.
Crude Oil
The U.S. on Nov. 10 raised its forecast for crude oilprices this year and next on speculation that demand will riseas the global economy improves. West Texas Intermediate oil, theU.S. benchmark, will average $62 a barrel in 2009, up from lastmonth’s forecast of $59.90. Crude oil will average $78.13 in2010, according to the monthly Short-Term Energy Outlook reportfrom the Energy Department’s Energy Information Administration.
Crude oil traded on the New York Mercantile Exchangeaveraged $75.82 a barrel in October, compared with $69.47 inSeptember. Prices have continued to increase this month,averaging $78.69.
Gasoline prices in October averaged $2.56 a gallon inOctober, compared with $2.55 a month earlier, according to AAA.
Food prices, which account for 14.6 percent of the CPI,increased 0.1 percent in October, reflecting higher dairy costs.Prices for meats and fruits and vegetables declined during themonth.
Walmart Cost Cuts
Walmart, the world’s largest retailer, is experiencing“ongoing deflation across our businesses,” Michael T. Durke,the Bentonville, Arkansas-based company’s chief executiveofficer said Nov. 12. Walmart accelerated efforts to cut costsin the third quarter as falling food prices and the worst U.S.unemployment rate in a quarter century muted revenue.
Owners-equivalent rent, one of the categories used to trackrental prices, was unchanged. In September, the measure dropped0.1 percent, the first decline since 1992.
Costs of medical care increased 0.2 percent in October andare up 3.5 percent from the same month last year. Airline faresrose 1.7 percent last month.
The CPI is the broadest of the three monthly price gaugesfrom the Labor Department because it includes goods andservices. A report yesterday showed wholesale prices rose 0.3percent. The cost of imported goods rose 0.7 percent, thegovernment said last week.
Almost 60 percent of the CPI covers prices consumers payfor services ranging from medical visits to airline fares andmovie tickets.
The Fed earlier this month repeated that it will keepinterest rates near zero for “an extended period” andspecified for the first time that policy will stay unchanged aslong as inflation expectations are stable and unemployment failsto decline.
“Inflation seems likely to remain subdued for some time,”Bernanke said in a Nov. 16 speech to the Economic Club of NewYork. The weak labor market and reduced bank lending He alsosaid “significant economic challenges remain.”
To contact the reporter on this story:Courtney Schlisserman in Washington cshlisserma@bloomberg.net
Last Updated: November 18, 2009 09:04 ESTSource: Bloomberg
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