April 27, 2024

U.S. Consumer Inflation Subdued, Housing Starts Up

The report from the Labor Department showed that the overall Consumer Price Index rose 0.3 percent last month compared with a 0.4 percent rise in August. Gasoline prices rose at a faster pace, while the increase in food prices slowed.

The core C.P.I., which strips out such volatile categories, recorded a 0.1 percent rise in September, its smallest since March, compared with 0.2 percent in August. It was kept in check by some of the prices of its key components, such as rents, which rose moderately, and automobiles, which did not rise at all. The indexes for apparel, used cars and recreation declined.

The report, which reflects seasonally adjusted figures, showed that inflationary pressures were contained despite a rise in wholesale prices. Still, some commodity prices are expected to moderate in the months ahead as lower energy costs start to filter through the data, according to Russell Price, a senior economist with Ameriprise Financial.

“That is the lagging impact of petroleum prices,” he said.

The overall C.P.I. was 3.9 percent in the 12 months to September compared with 3.8 percent in August. Gasoline rose 2.9 percent in September, compared with 1.9 percent the month before. Food prices were up 0.4 percent, compared with 0.5 percent in August.

In the 12 months to September, the core C.P.I. was up 2 percent, the same rate as the 12-month period through August.

“The core prices are starting to show that they are easing,” said Chris Christopher, the United States economist for IHS Global Insight. “So hopefully for consumers in particular prices will start moderating significantly.”

The report also showed that the Consumer Price Index for Urban Wage Earners and Clerical Workers increased 4.4 percent over the past 12 months. That measure is used as a basis, in the third quarter, for cost of living adjustments in Social Security payments, which the government said on Wednesday would reflect an increase of 3.6 percent starting in January, the first adjustment since 2009.

Still, Mr. Christopher noted that actual net checks to retirees would probably not rise by that percentage because of increases in Medicare premiums.

“At least it is mitigating,” he said. “It does not really amount to much.”

Government reports released on Wednesday also provided a glimpse of other sectors of the economy, including the job market and the housing sector, which continues to be challenged by financial pressures on households and a large supply of existing homes.

The Federal Reserve said in its beige book, which is a survey of regional economic conditions, that overall economic activity was expanding in September, although many of the 12 districts described growth as “modest” or “slight.”

The beige book reported limited demand for new employees, although some districts noted difficulties finding skilled workers or said that hiring was hampered by an uncertain outlook for business or lower expectations for future growth. Residential construction remained at low levels, it said, particularly for single-family homes, while there was a moderate increase in the building of multi-family dwellings. In contrast, the report said, rental demand continued to rise.

Those observations were consistent with government statistics that showed housing starts, which reflect the commitment of builders and suggest that consumer spending could follow on durable goods, were up 15 percent, mostly for multiple family units. But there was no significant rise in the trend for the start of construction on single family units.

“This is consistent with reports that homebuilder confidence remains severely depressed,” Joshua Shapiro, chief United States economist at MFR, said in a research note.

Celia Chen, a senior director at Moody’s Analytics, said uncertainty about jobs and problems with foreclosures have affected the single family housing sector. Home values have fallen and it is still difficult for many people to get a mortgage.

“Many of the households forming right now are just not going to have the wherewithal to purchase a home,” said Ms. Chen.

“The ownership market faces many headwinds,” she added. “All the strength we are seeing is on the multi-family side.”

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Consumer Inflation Shows Small Rise for May

Taken together, the reports reflect the impact of some of the global events that took place in recent months.

“Both of them are reflective of the slowdown in the economy that we have experienced over the last few months,” said Russell Price, a senior economist with Ameriprise Financial.

The Labor Department said in its monthly report that the Consumer Price Index, the most widely used measure of inflation, was up 0.2 percent in May, compared with 0.4 percent in April, and up 3.6 percent from a year earlier before seasonal adjustment.

The monthly rise in the C.P.I. was the lowest since November, when the index was up 0.1 percent, the department’s Bureau of Labor Statistics said.

Analysts had forecast smaller increases, expecting a monthly rise of 0.1 percent in May and a 3.4 percent rise for the 12-month period.

The overall C.P.I. index reflected rising food prices, with the food index up 0.4 percent, the same as the previous month. The energy index fell by 1.0 percent in May, including a 2.0 percent decrease in the gasoline component in May, making it the first time gasoline has declined since June 2010.

When the traditionally volatile prices for energy and food are stripped out, the core C.P.I. index in May recorded its largest increase since July 2008. It edged up 0.3 percent in May, compared with 0.2 percent in April, and reached 1.5 percent in the 12-month period, the department said. The monthly indexes for May were above analysts’ forecasts of 0.2 percent and 1.4 percent for the year.

Prices for clothes, shelter, new vehicles and recreation contributed to the price acceleration last month, the department said, while there were declines in airline fares, tobacco, and personal care.

In another report released on Wednesday, manufacturers in the New York region reflected less optimism about business conditions. The Empire State Manufacturing Survey, released by the Federal Reserve Bank of New York, indicated that conditions for New York manufacturers deteriorated in June, as measured by the survey’s general business conditions index, which fell 20 points to -7.8, dipping below zero for the first time since November of 2010.

Analysts had forecast a decline in the index but that it would remain above zero, at 14.

In addition, the future general business index fell compared with its level in May, suggesting that optimism about the next six months has deteriorated. It was down 30 points to 22.5, its lowest level since early 2009, the survey said.

The new-orders and shipments indexes posted steep declines and fell below zero, the report said. The indexes for number of employees, prices paid and prices received were also lower.

Mr. Price noted that automobile production in the United States declined in April after the March earthquake and tsunami in Japan, contributing to a moderation in business activity. Demand has softened because of the recent spike in gasoline prices.

“It affects just about every region,” Mr. Price said. “In the manufacturing report, the component shortages were the No. 1 factor, and then the broader softening that went along with the higher gasoline prices.”

A third report from the Federal Reserve showed that industrial production rose 0.1 percent in May, after no growth in April because of the Mississippi river flooding and the effects on business related to Japan, analysts said. The report showed a 0.4 percent increase in manufacturing production in May that was mostly offset by a 3.3 percent decline in electric utility production. 

“It is clear that supply chain problems emanating from Japan are still an issue — motor vehicle production fell again in May, but overall manufacturing is robust,” Daniel J. Meckstroth, the chief economist for the Manufacturers Alliance/MAPI, said in a statement. 

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