Surge In Gasoline Prices Pushes Consumer Inflation Higher
Friday, December 14th 2007, 7:46 am CST
WASHINGTON (AP) _ Consumer inflation surged by the largest amount in more than two years in November, led by gasoline prices. The cost of clothing, airline tickets and prescription drugs also jumped.
The Labor Department said its closely watched Consumer Price Index rose 0.8 % last month, the biggest one-month increase since a 1.2 % surge in September 2005, when the country was hit by rising energy costs in the wake of Hurricane Katrina.
Meanwhile, the Federal Reserve reported that industrial production rebounded in November, rising by 0.3 % after having fallen by a sharp 0.7 % in October. The gain was slightly higher than had been expected.
The improvement last month reflected an increase in output at auto plants which helped lift manufacturing production by 0.4 %. Output in the mining sector, which includes oil production, was up 1.1 % while utility output fell by 1.3 %.
The inflation report showed that outside of energy, price pressures were rising as well. Core inflation, which excludes energy and food, rose by 0.3 % last month, the biggest increase in 10 months.
The 0.8 % rise in consumer prices was worse than the 0.6 % advance that economists had expected. With one month to go, inflation in 2007 is rising at an annual rate of 4.2 %, far above the 2.5 % increase in 2006.
The surge in inflation adds another risk to an economy that is already struggling under the weight of a meltdown in housing, a severe credit crunch and faltering consumer confidence.
The worry is that the jump in energy costs will leave consumers with less money to spend on other items, worsening the slowdown in economic growth that is already happening.
Former Federal Reserve Chairman Alan Greenspan told National Public Radio in an interview broadcast Friday that the odds of a recession are ``clearly rising'' with economic growth ``getting close to stall speed.''
Many economists believe that economic growth in the current October-December quarter could fall below 1 % at an annual rate, sharply below the 4.9 % rate of growth in the third quarter.
The Federal Reserve, trying to ward off an outright recession, cut a key interest rate this week for the third time this year. The Fed also announced a coordinated response with central banks around the world to pump more money into the banking system to combat a severe credit squeeze which has made it harder for consumers and businesses to get loans.
Energy costs were up 5.7 % in November, with gasoline prices rising by 9.3 %, the biggest increase since May. Gasoline prices have been pushed higher by a renewed surge in global energy costs that pushed crude oil prices close to $100 per barrel last month.
Food costs were 0.3 % in November, led higher by big increases in fruit and vegetable prices.
Outside of food and energy, clothing prices, which have been falling most of this year, surged by 0.8 %, the biggest rise since April 1999.
Airline tickets were up 2.6 %, representing the price hikes imposed by airlines because of their own rising fuel bills.
The cost of medical care, one of the leading areas for price gains, was up 0.4 % last month, led by a 0.8 % jump in prescription drug costs.