Annual U.S. Inflation Down 0.2%, Consumer Prices Rise 0.3% in October

U.S. consumer prices rose more than expected in October as higher fuel and new and used car prices drove up the cost of living for Americans, according to government data released Wednesday.

The newest Labor Department monthly report reveals that the Consumer Price Index (CPI) edged 0.3% higher, exceeding the 0.2% expectations voice by economists. The increase — the fifth in six months — follows a September elevation of 0.2% which came on the heels of a 0.4% rise in August.

"The latest CPI report does not alter the underlying picture and we continue to expect weaker inflation in 2010 as a result of the substantial amount of spare capacity in the economy," wrote Anna Piretti, an economist for BNP Paribas, who was cited on MarketWatch.

Energy prices were also up for the fifth time in the last six months. The indexes for gasoline, fuel oil, natural gas, and electricity all increased. New car prices rose sharply, jumping at a rate that has not been seen since the 1980s.

In October, core consumer prices or core inflation, which excludes volatile food and energy prices, rose by 0.2% after increasing by the same level in September. That was also 0.1% more than many analysts had expected.

12-Month U.S. Inflation Declines

The CPI data shows annual inflation has fallen 0.2% following a 1.3% decline in September. The annual declines are getting smaller as oil prices have risen from the almost five-year lows in December of last year.

"There will be a much more substantial jump in retail gasoline prices in November’s figures," Paul Ashworth, Toronto-based economist for Capital Economics Ltd, said on the Denver Business Journal. He said the year-over-year CPI decline is "thanks to the favorable base effects of the collapse in commodity prices last year. Over the next couple of months, however, those base effects will drop out of the equation and the annual inflation rate will whipsaw back above the core rate."

Core inflation is up 1.7% in the past year, and follows the 12- month +1.5% reading in September. The inflation figure is still within the Federal Reserve’s comfort range of between 1%-2%.

Consumer price details

Rising October prices include:

  • New vehicles prices climbed 1.6% following a 0.4% rise in
    September
  • Used car and truck prices rose soared 3.4% after rising 1.6% in the month prior
  • Energy prices jumped 1.5% after a 0.6% increase in September
  • Gasoline prices rose 1.6% following an increase of 1.0% from the month prior
  • Fuel oil prices soared 6.3%. They rose 1.5% in September.
  • Electricity costs were up 0.6%, the same as September
  • Food prices rose 0.1% after declining 0.1%
  • Airfairs rose for the fourth straight month, increasing 1.7% in October
  • Lodging away from home prices rose 0.4% after a 1.5% increase
  • Dairy and related products rose 1.0% in October after a 0.5% increase in September
  • Natural gas prices rose 1.9% in October after declining 1.7%
  • Medical care prices rose 0.2%

Declining October prices include:

  • Clothing prices declined 0.4% in October after declining 0.1% in the month prior
  • Meats, poultry, fish and egg prices fell 0.2% after a 1.2% decline in September
  • Fruits and vegetables were down by 0.7%, following a 1.2% decline

Housing prices, which accounts for about a third of the CPI index, were unchanged for the second straight month.

On Tuesday, the Labor Department released the Producer Price Index, which measures prices at the factory door and inflation pressures before they reach the consumer. The PPI showed a 0.3% rise in October, but discounting volatile food and energy prices, the core reading declined 0.6% — the biggest drop since July 2006.

Finally, an analysis of consumer prices, the future of inflation and interest rates via MarketWatch. Michelle Girard, senior economist at RBS Securities, talks to Kelsey Hubbard about inflation trends and the economy.

2 thoughts on “Annual U.S. Inflation Down 0.2%, Consumer Prices Rise 0.3% in October”

  1. If you annualize the .3% (multiply by 12) rate you get 3.6% inflation, but this isn’t really a valid way to determine the current rate. For an accurate rate look at the slope of CPI-U all-items plotted vs time. That slope is 2.73% since the CPI low December 2008. Although annual inflation is at -.2% it can be expected to jump 192 basis points to +1.69 next month (December) as comparisons get less favorable.

  2. The headline for this article is misleading in that it suggests that the movement in the inflation number was downward compared to Sept. This is not true. Inflation moved UPWARD, i.e. INCREASED 109 basis points from -1.32 in September to -0.23 in October.

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