Consumer prices fall while industrial output manages small increase
Thursday, November 16th 2006, 8:40 am
News On 6
WASHINGTON (AP) _ Consumer prices, helped by another huge decline in gasoline pump prices, fell for a second straight month in October, providing more relief to Americans battered earlier in the year by soaring energy costs.
The Labor Department reported Thursday that consumer prices dropped by 0.5 percent last month, matching the September decline. It was the first back-to-back drops in the Consumer Price Index since late last year and provided evidence that inflation pressures are beginning to ease.
Meanwhile, industrial production edged up slightly in October even though output at auto factories fell for a second straight month.
The Federal Reserve reported that industrial output rose by 0.2 percent last month following a big 0.6 percent plunge in September. However, auto production was down 3.9 percent last month as automakers continued to struggle to get control of a huge backlog of unsold cars.
In a third report, the number of Americans filing claims for unemployment benefits dipped by 2,000 last week to 308,000, the lowest level in a month, indicating that the labor market remains healthy in spite of the slowing economy.
The second 0.5 percent fall in consumer prices was better than the 0.3 percent dip that many analysts had been expecting. And core inflation, which excludes volatile energy and food prices, was also well-behaved, rising by just 0.1 percent, the smallest gain in eight months.
The news on inflation was certain to cheer officials at the Federal Reserve. They are hoping that 17 consecutive interest rate increases will produce a soft landing for the economy in which business growth slows enough to reduce inflation pressures without threatening a recession.
Fed officials hold their last meeting of the year on Dec. 12 and private economists are forecasting that the central bank will leave rates unchanged at that meeting and will probably stay on hold for at least the first half of 2007.
The slowdown in inflation provided a boost to Americans' weekly incomes, which were up by 3.3 percent in October compared to a year ago, after discounting inflation. That was the biggest 12-month increase in eight years and followed a period of extremely sluggish wage growth, which Democrats said in the recent elections showed that Republican economic policies were failing the middle class.
Republicans, who lost control of both the House and Senate to the Democrats, countered that wage growth was poised to pick up with unemployment falling to five-year lows.
The good performance on inflation in October was led by a 7 percent drop in energy prices, which followed a 7.2 percent decline in September. Gasoline prices were down 11.1 percent with natural gas and home heating oil also posting big declines.
Since peaking at a record above $3 per gallon in early August, gasoline pump prices have dropped by around 80 cents per gallon nationwide in the past three months.
Food costs edged up 0.3 percent in October as increases in beef, pork and vegetable prices offset declines in poultry and fruit prices.
Excluding food and energy, the 0.1 percent rise in the core inflation rate was the smallest since a similar 0.1 percent increase in February.
Over the past 12 months, core inflation is up by 2.7 percent, still above the Fed's comfort zone of increases in the range of 1 percent to 2 percent.