Consumer prices dip; industrial production surges, housing sizzles in November

WASHINGTON (AP) _Consumer prices dipped by 0.2 percent in November, pulled down by cheaper gasoline, clothes and airline fares, fresh evidence that inflation isn't a problem even as the economy has

Tuesday, December 16th 2003, 12:00 am

By: News On 6


WASHINGTON (AP) _Consumer prices dipped by 0.2 percent in November, pulled down by cheaper gasoline, clothes and airline fares, fresh evidence that inflation isn't a problem even as the economy has shifted into a higher gear. Production at big industry surged, another report released Tuesday showed.

The Labor Department's latest reading on the Consumer Price Index, the government's most closely watched inflation barometer, comes after consumer prices were flat in October. It marked the first decline in the CPI since April, when prices dropped by 0.3 percent.

The Federal Reserve reported that industrial production jumped by 0.9 percent in November, the strongest performance since October 1999 and a new sign that the worst may be over for the nation's battered manufacturing sector.

``The economy is perking along pretty nicely and isn't generating inflation,'' said Bill Cheney, chief economist at John Hancock. ``People might have a hard time at a personal level believing that inflation is absent because they tend to notice the prices that go up. But there's quite a few bargains around.''

On Wall Street, stocks rose. The Dow Jones industrials gained 58 points and the Nasdaq was up 4 points in morning trading.

The 0.9 percent increase in industrial production beat out economists' forecasts and was more than two times the 0.4 percent rise registered in October.

In other economic news, the red-hot housing market continued to sizzle in November with construction of new homes and apartments rising 4.5 percent to an annual rate of 2.07 million units, the fastest building pace in nearly two decades, the Commerce Department said.

The nation's broadest measure of foreign trade _ the current account deficit _ narrowed slightly in the third quarter to $135.04 billion, an improvement from the record quarterly deficit of $139.39 billion set in the second quarter, the department said in another report.

In the CPI report, excluding energy and food prices, which can swing widely from month to month, ``core'' prices fell by 0.1 percent in November, the biggest drop since December 1982 and down from a 0.2 percent increase in October.

The declines in both overall consumer prices and in core inflation in November surprised economists. They were forecasting a tiny 0.1 percent advance in each measure.

Because inflation has been tame for some time, the Federal Reserve last week held a key short-term interest rate at a 45-year low of 1 percent and suggested it could stay there for a ``considerable period.'' Tuesday's CPI report gives the Fed leeway to do just that, economists said.

Fed policy-makers last week said the dangerous prospect that inflation could move lower was less of a concern than it has been. That marked a change from recent months where Fed policy-makers identified the remote threat of deflation, a widespread and prolonged price decline, as a risk that they must be on guard against because of its potential to wreck the economy.

The worries about deflation should dim as the economy gains traction, analysts said.

The economy grew at a scorching 8.2 percent annual rate in the third quarter, the hottest pace in nearly two decades. Analysts believed the economy slowed to a 4 percent growth rate in the October-to-December quarter, which would still be considered a healthy pace.

For the first 11 months of this year, consumer prices have risen at a seasonally adjusted annual rate of 1.8 percent, slower than the 2.4 percent rise for all of 2002. Core prices, meanwhile, have advanced at a rate of 1.1 percent so far this year, compared with a 1.9 percent increase last year.

In November, falling prices for energy products, clothing and airline fares outweighed rising prices for food, medical care and college tuition.

Energy prices retreated by 3 percent in November. That was led by a 5 percent drop in gasoline prices. Natural gas prices fell 3.1 percent and electricity prices went down by 0.6 percent last month. However, fuel oil costs rose 1 percent.

Food prices rose by 0.4 percent last month. Higher prices for beef and veal, fruit, poultry and pork swamped lower prices for vegetables and dairy products.

Elsewhere in the report: clothing prices last month dropped by 0.5 percent, airline fares fell 2.6 percent, lodging prices declined 1.1 percent and new-car prices were flat.

Medical care costs rose 0.3 percent in November and college tuition and fees went up by 0.4 percent, continued sore spots for consumers.
logo

Get The Daily Update!

Be among the first to get breaking news, weather, and general news updates from News on 6 delivered right to your inbox!

More Like This

December 16th, 2003

September 29th, 2024

July 4th, 2024

April 15th, 2024

Top Headlines

October 9th, 2024

October 9th, 2024

October 9th, 2024

October 9th, 2024