US Inflation Slows as Consumer Prices Dip 0.1% in October 2011

Consumer prices retreated in October 2011 for the first time in four months as Americans paid less for gasoline, cars and other items. The decline trimmed the annual US inflation rate by four points from the previous 12-month reading which had marked the biggest increase in three years.

The US Labor Department on Wednesday said consumer prices fell 0.1 percent in October after rising 0.3, 0.4 and 0.5 percent in the respective months of September, August and July. Consumer prices last dipped on a monthly basis in June (by 0.2 percent) due to sharply lower energy costs. The catalyst for October’s decrease was markedly the same.

"A decline in the energy index more than offset small increases in the indexes for food" and other items to create the decrease, noted the US Labor Department in its monthly Consumer Price Index (CPI) report which is seen as the government’s main gauge for US inflation.

"The energy index turned down in October after increasing in each of the three previous months as the gasoline and household energy indexes declined after a series of seasonally adjusted increases. The food index rose in October, but posted its smallest increase of the year as the fruits and vegetables index declined sharply," the US Labor Department explained.

Food prices in October edged 0.1 percent higher following a pick-up of 0.4 percent in September. Energy prices fell 2.0 percent after rising 2.0 previously. Leading declines was a 3.1 percent drop in gasoline. As a comparison, prices at the pump jumped 2.9 percent in the previous month.

The CPI picture is not all rosy, however. Despite the latest drop in gasoline prices, they are still painfully 23.5 percent higher than a year ago. And on a further sour note, crude oil on Wednesday hit $100 per barrel for the first time since July. Oil prices were in the $75 area as early as October.

Stripping out volatile energy and food prices, core US inflation in October advanced 0.1 percent for a second straight month — the smallest gains this year. Among core consumer goods and services to see directional changes:

  • New car prices fell 0.3 percent versus an unchanged reading in September, and
  • Clothing costs rose 0.3 percent against the previous 1.1 percent decline

Used car prices declined 0.6 percent, matching the previous month. Accelerated prices in October included shelter (+0.2 percent vs. +0.1 percent) and medical care (+0.5 vs. +0.2 percent).

US inflation rose 3.5 percent in the 12 months ending in October after advancing 3.9 and 3.8 percent in each of the year-over-year gains ending in September and August. The annual rate was at 1.1 percent as recently as last November and registered a record low of 0.6 percent in October 2010.

The core US inflation rate over the past year rose 2.1 percent, up from the 2.0 percent increases reported in September and August. The longer term core inflation index is the one most watched by the Federal Reserve. The core index stands a bit above the Fed’s target range which is often cited from 1.5 to 2.0 percent. Most analysts are not, at least yet, voicing concerns.

"The inflation outlook is pretty benign," Bloomberg quoted Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, who correctly projected the CPI decline. "The fact that recent higher readings are moderating certainly speaks well to the Fed’s accommodative policy."

US Labor Department inflation data on a 12-month basis and between April and October follows:

October 2011 Consumer Prices – Gains (percent)

  Apr
2011
May
2011
June
2011
July
2011
Aug
2011
Sept
2011
Oct
2011
12
Month
All items 0.4 0.2 -0.2 0.5 0.4 0.3 -0.1 3.5
  Food 0.4 0.4 0.2 0.4 0.5 0.4 0.1 4.7
    Food at home 0.5 0.5 0.2 0.6 0.6 0.6 0.1 6.2
    Food away from home 0.3 0.2 0.3 0.2 0.4 0.2 0.2 2.7
  Energy 2.2 -1.0 -4.4 2.8 1.2 2.0 -2.0 14.2
    Energy commodities 3.1 -1.9 -6.3 4.3 1.6 2.7 -2.9 23.4
      Gasoline (all types) 3.3 -2.0 -6.8 4.7 1.9 2.9 -3.1 23.5
      Fuel oil 3.2 -0.8 -2.2 -1.7 -0.4 -0.7 -0.5 26.8
    Energy services 0.6 0.6 -1.1 0.4 0.4 0.7 -0.4 1.7
      Electricity 0.2 0.8 -1.6 0.8 -0.1 0.7 0.4 2.9
      Utility (piped) gas service 1.9 -0.3 0.4 -1.2 2.2 0.8 -3.0 -2.2
  All items less food, energy 0.2 0.3 0.3 0.2 0.2 0.1 0.1 2.1
    Comm. less food, energy 0.4 0.5 0.5 0.3 0.4 -0.2 -0.1 2.1
      New vehicles 0.7 1.1 0.6 .0 .0 .0 -0.3 3.4
      Used cars and trucks 1.2 1.1 1.6 0.7 0.9 -0.6 -0.6 5.2
      Apparel 0.2 1.2 1.4 1.2 1.1 -1.1 0.4 4.2
      Medical care 0.5 .0 -0.1 .0 0.1 0.2 0.3 3.1
    Services less energy 0.1 0.2 0.1 0.2 0.2 0.2 0.2 2.1
      Shelter 0.1 0.2 0.2 0.3 0.2 0.1 0.2 1.8
      Transportation 0.2 0.1 -0.3 -0.1 0.2 0.5 0.1 3.0
      Medical care 0.3 0.3 0.3 0.3 0.3 0.2 0.5 3.1

 

The US Labor Department will release the November 2011 Consumer Price Index data on December 16, 2011 at 8:30 AM Eastern Time. Current and historic CPI files are used as the core data for the US Inflation Calculator.

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