Consumer Prices Increase for Third Consecutive Month
The cost of living in the United States rose for a third consecutive month, driven by fuel and housing and indicating that inflation is moving closer to the Federal Reserve’s goal.
The consumer-price index climbed 0.4% in October from the previous month after a 0.3% gain in September, Labor Department figures showed Nov. 17 in Washington. That matched the median forecast in a Bloomberg News survey of economists. Excluding volatile food and fuel, the so-called core measure rose 0.1%, just below the estimate of 0.2%.
Firming inflation and a healthy job market have laid the groundwork for Fed officials to raise interest rates when they meet in December. With energy costs grinding higher, price pressures will have room to gain traction more broadly in the economy, while companies may begin to gain greater pricing power amid steady consumer demand.
“We’re seeing a gradual uptrend in inflation,” Mike Englund, chief economist at Action Economics in Boulder, Colorado, said before the report. “It’s one more factor that locks in a Fed hike in December.”
The Fed’s preferred gauge of inflation, which is the Commerce Department’s personal consumption expenditures measure, hasn’t matched the central bank’s 2% goal since April 2012.
Fed Chair Janet Yellen said Nov. 17 that a rate hike “could well become appropriate relatively soon if incoming data provide some further evidence of continued progress.” Policymakers are due to hold their final meeting for the year Dec. 13-14, and the odds of an interest-rate increase were close to 100% on Nov. 17, according to trading in fed funds futures.
Bloomberg survey estimates for the consumer price index ranged from a decline of 0.1% to a gain of 0.5%.
The consumer price gauge increased 1.6% in the 12 months ended in October, after a 1.5% year-over-year advance the prior month.
The rise in the core CPI measure followed a 0.1% gain in the previous month. It increased 2.1% from October 2015, after rising 2.2% in the prior 12-month period.
The median projections in the Bloomberg survey called for the core gauge to rise 0.2% from the previous month and to climb 2.2% from the prior year.
Energy costs increased 3.5% from a month earlier, with gasoline up 7% and accounting for more than half of the increase in the overall index, the report showed. Food prices were little changed.
“Oil prices are finding an equilibrium,” Englund said. “We’re losing the drag on the headline inflation number. Any remnants of concern about deflation are evaporating.”
Expenses for shelter climbed 0.4% for a second month. Owners-equivalent rent, one of the categories designed to track rental prices, was up 0.3%.
Americans paid 0.2% more for new automobiles. Clothing prices rose 0.3%, while airfares decreased 2.2%.
Expenses for medical care were little changed. These readings often vary from results for this category within the Fed’s preferred measure of inflation. Economists attribute the discrepancy to different methodologies.
The CPI is the broadest of three price gauges from the Labor Department because it includes all goods and services. About 60% of the index covers prices consumers pay for services from medical visits to airline fares, movie tickets and rents.
The cost-of-living increase offset most of the gain in paychecks in October, a separate report from the Labor Department showed Nov. 17. Hourly earnings adjusted for inflation rose 0.1% from the prior month. They were up 1.2% over the past 12 months.
