Consumer Inflation Declines

Consumer prices in the United States fell in November for the first time in six months, pointing to muted inflation pressures that should allow the Federal Reserve to stay on its ultra-easy monetary policy path as it tries to nurse the economy back to health.

The Labor Department said on Friday its Consumer Price Index dropped 0.3 percent last month as a sharp decline in gasoline prices offset increases in other areas. It was the largest drop since May and followed a 0.1 percent gain in October.

Economists polled by Reuters had expected consumer prices to fall 0.2 percent.

The so-called core C.P.I., which excludes food and energy prices, edged up 0.1 percent after rising 0.2 percent in October. Although food prices rose 0.2 percent in a lagged response to the summer drought, price pressures remain tame.

“The inflation data continues to be benign and there is very little in the way of price pressures in the economy,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. “That therefore justifies the Federal Reserve’s action to keep a very accommodative monetary policy.”

The Fed said on Wednesday it expected to hold interest rates near zero until unemployment falls to at least 6.5 percent and as long as inflation does not threaten to break above 2.5 percent.

The central bank also replaced an expiring stimulus program with a fresh round of Treasury debt purchases, to help speed up economic growth in the near term. The slack labor market is a major factor in dampening inflation pressures.

In the 12 months that ended in November, overall consumer prices increased 1.8 percent, the smallest increase since August. That compared to October’s 2.2 percent rise.

The Labor Department said inflation-adjusted average weekly earnings rose 0.5 percent last month, reversing October’s 0.5 percent fall.

Last month, gasoline prices tumbled 7.4 percent, the largest drop since December 2008, after falling 0.6 percent In October. That offset a 0.2 percent gain in food prices.

Away from gasoline and food, the cost of apparel fell 0.6 percent after increasing 0.7 percent in October. New motor vehicle prices rose 0.2 percent after slipping 0.1 percent the prior month.

Housing costs edged up, with owners’ equivalent rent rising 0.2 percent after climbing by a similar margin in October. Rents have been advancing in recent months, largely driven by a decline in homeownership.

In the 12 months ended in November, core C.P.I. increased 1.9 percent after rising 2.0 percent in October.

Article source: http://www.nytimes.com/2012/12/15/business/economy/consumer-inflation-declines.html?partner=rss&emc=rss