Deflation: U.S. consumer prices plunge by largest amount in 56 years
09:16:19 EST Dec 15, 2005
MARTIN CRUTSINGER
WASHINGTON (AP) - U.S. consumer prices plunged by the largest amount in more than a half-century in November as gasoline prices fell by a record amount.
The Labour Department reported Thursday that its closely watched consumer price index - a key measure of inflation - dropped by 0.6 per cent last month, the biggest monthly decline since a 0.9 per cent fall in July 1949.
The "deflation" number was better than the 0.4 per cent drop that analysts had been expecting.
Outside the volatile food and energy categories, prices were up 0.2 per cent, a modest gain that should help relieve fears that this year's surge in energy costs could evolve into more widespread inflation problems.
In other economic news, the number of people who have lost jobs because of the string of devastating Gulf Coast hurricanes climbed to 602,200 last week.
That gain reflected a rise of 1,500 jobless applications linked to Katrina and Rita and an additional 1,000 claims linked to Wilma, which hit Florida in Octper centober.
Overall, the number filing new claims for unemployment benefits totaled 329,000 last week, compared to 328,000 the week before. Analysts said that even with the slight rise of 1,000 in overall claims, they remained at a level consistent with strong employment growth.
The huge 0.6 per cent fall in consumer prices last month followed a small 0.2 per cent October increase which had come after a 1.2 per cent surge in September, which had been the biggest monthly gain in a quarter-century.
The huge swings in inflation reflected the surge in energy prices related to widespread production shutdowns along the Gulf Coast after the hurricanes hit.
In early September, the countrywide price for gasoline briefly hit a record high above $3 US per gallon. But since that time pump prices have been falling, including an additional decline of around 42 cents in November.
That decline pushed gasoline prices down by a record 16 per cent in the CPI report, a drop that had followed a 4.5 per cent decline in October.
Overall, energy prices were down a record 8 per cent, reflecting not only the fall in gasoline but also declines of 6.1 per cent for home heating oil and 0.5 per cent for natural gas. Those drops still left prices higher than a year ago and homeowners will feel the pinch when they pay heating bills this winter.
Food costs were up 0.3 per cent in November, with the price of beef, pork and poultry all up. Fresh fruit prices also rose by the cost of vegetables dropped.
Through the first 11 months of this year, inflation at the consumer level has been rising at an annual rate of 3.8 per cent, compared to an increase for all of 2004 of 3.3 per cent. The slight acceleration in overall inflation reflected faster increases in energy prices, which are up at an annual rate of 21.7 per cent so far this year compared to a rise of 16.6 per cent for all of 2004.
Excluding food and energy, prices this year are up 2.1 per cent, a well-behaved performance which was a slight improvement over the 2.2 per cent rise in so-called core prices last year.
On Tuesday, the Federal Reserve nudged interest rates by a quarter-point for the 13th time and signaled a possible end to the string of rate hikes imposed with the hope of ensuring that inflation did not get out of control.
The Fed noted in its statement that "core inflation has stayed relatively low in recent months and longer-term inflation expectations remain well contained."
The good performance of core inflation has allowed the Fed to stick to its gradual rate increases rather than being forced to move to faster rate hikes that could slam the brakes on economic growth.
More than half of the 0.2 per cent increase in core inflation last month was attributed to a 1.3 per cent rise in the cost of hotel and motel rooms.
The price of new cars was down 0.1 per cent while airline fares, which have been increasing sharply because of higher fuel costs, fell by 1.5 per cent in November.
Medical care, a sector with some of the fastest increases in prices, showed a gain of 0.6 per cent in November as prescription drug costs jumped by 0.7 per cent.
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It does not really count.
Equally the rise that preceded did not really count either.
I do not see that either had anything to do with inflation per se
Mish |
