Consumer Prices Dip by 0.2 Percent in November
By JEANNINE AVERSA
Associated Press Writer
Tuesday, December 16, 2003; 1:44 PM
Consumer prices slid, industrial production surged and housing construction sizzled in November, signs that the economic recovery is powering ahead without unwanted inflation.
The latest batch of economic news Tuesday raised hopes that the recovery will be lasting and that businesses may feel more inclined to boost hiring, analysts said.
"We have no inflation, once idle factories are pumping out goods and houses are being erected at a breakneck pace. This is a perfect recipe for economic strength," said Richard Yamarone, economist at Argus Research Corp.
After being flat in October, the Consumer Price Index dipped 0.2 percent in November, pulled down by cheaper gasoline, clothes and airline fares, the Labor Department reported. It marked the first decline since April.
Industrial production, meanwhile, jumped 0.9 percent last month, the strongest performance in four years and more than twice the 0.4 percent rise registered in October, the Federal Reserve said in a report that offered a fresh sign that the nation's battered manufacturing sector is truly on the mend.
"We have been anticipating and hoping for a robust turnaround in manufacturing for some time. And though the recovery has had a few false starts, we're now solidly out of the blocks and moving along the right track," said David Huether, chief economist at the National Association of Manufacturers.
In other economic news, the red-hot housing market continued to sizzle in November, with construction of new homes and apartments rising 4.5 percent to an annual rate of 2.07 million units, the fastest building pace in nearly two decades, the Commerce Department said.
"It's all a very positive story and it all seems to fit into a picture that the economy really is picking up and probably picking up enough to generate some jobs," said Bill Cheney, chief economist at John Hancock.
That's important to President Bush as he heads into his 2004 re-election campaign. Since Bush took office in January 2001, the economy has lost 2.3 million jobs, giving Democrats a campaign issue to use against him.
"There is more yet to be done. We will continue our efforts until every American looking for work can find a job," said Treasury Secretary John Snow.
In the CPI report, excluding energy and food prices, which can swing widely from month to month, "core" prices fell 0.1 percent in November, the first drop since December 1982 and down from a 0.2 percent increase in October.
Because inflation has been tame, the Federal Reserve last week held a key short-term interest rate at a 45-year low of 1 percent and said it could stay there for a some time. The CPI report suggests the Fed has leeway to keep rates low into 2005, some economists said.
The economy grew at a scorching 8.2 percent annual rate in the third quarter, the hottest pace in nearly two decades. Analysts believe the economy slowed to a 4 percent growth rate in the current quarter, which would still be a healthy pace.
With the economy gaining traction, Fed policy-makers said last week that the dangerous prospect that inflation could move lower was less of a concern than it has been.
For the first 11 months of this year, consumer prices have risen at a seasonally adjusted annual rate of 1.8 percent, slower than the 2.4 percent rise for all of 2002. Core prices, meanwhile, have advanced at a rate of 1.1 percent so far this year, compared with a 1.9 percent increase last year.
Falling prices for energy products, clothing and airline fares last month outweighed rising prices for food, medical care and college tuition.
Energy prices retreated by 3 percent in November, led by a 5 percent drop in gasoline prices. Natural gas prices fell 3.1 percent and electricity prices went down 0.6 percent last month, although fuel oil costs rose 1 percent.
Food prices rose 0.4 percent last month. Higher prices for beef and veal, fruit, poultry and pork swamped lower prices for vegetables and dairy products.
Elsewhere in the report: Clothing prices last month dropped 0.5 percent, airline fares fell 2.6 percent, lodging prices declined 1.1 percent and new-car prices were flat.
Medical care costs rose 0.3 percent in November and college tuition and fees went up 0.4 percent, continued sore spots for consumers. |
