Consumer Prices Rise 3.6%,
Hinting at Future Inflation
By YOCHI J. DREAZEN
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON -- After years of dormancy, inflation seems to be stirring.
See the full text of the Commerce Department's report on October consumer prices.
See Briefing.com for more information about the report on consumer prices.
See the full text of the Labor Department report on real earnings.
See the full text of the Labor Department's report on initial jobless claims for the week ending Nov. 11.
See Briefing.com for more information about the jobless-claims report.
Consumer prices have advanced at a seasonally adjusted annual rate of 3.6% so far this year, far higher than a 2.7% increase seen for all of last year. Core prices, which exclude the volatile energy and food sectors, rose at an annual rate of 2.7% in the first 10 months, compared with a gain of just 1.9% for the entire year last year.
The upward climb has taken place below the radar screen of many economists, who have focused on slower economic growth or monthly inflation numbers that appear to be inconclusive. Thursday, for example, the Labor Department said consumer prices edged up by just 0.2% in October, far lower than the 0.5% increase recorded a month earlier. Core prices also gained just 0.2%, a notch lower than in September.
To be sure, inflation remains tame by historical standards. Import prices are still falling, thanks to the strong dollar, wholesale prices have been stable and massive gains in work-force productivity have helped many companies absorb higher energy and labor costs without having to boost their prices accordingly.
Consumer prices have been rising steadily, however, and many analysts worry that the situation will get worse before it gets better. A continued run-up in inflation could have severe consequences, potentially forcing the Federal Reserve to boost interest rates even as the economy continues to slow.
"People seem to believe that the slowing economy will take care of everything for us, and that's probably not the case," said Stephen G. Cecchetti, an Ohio State University economics professor and former research director for the Federal Reserve Bank of New York. "When prices accelerate like this, you have to be concerned about when they'll stop."
Analysts say a range of factors could push prices higher in coming months. The slowing economy and doubts about the government's commitment to fiscal responsibility may weaken the dollar, making imported goods more expensive and reducing competitive pressures on domestic companies to keep their prices stable. "A strengthening euro would reignite inflation almost instantaneously," said Paul Taylor, chief economist of the National Automobile Dealers Association in McLean, Va. |
