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November 16, 2017

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US consumer prices edge up while retail sales increase

US consumer prices barely rose in October as the boost to gasoline prices from hurricane-related disruptions to Gulf Coast oil refineries was unwound, but rising rents and healthcare costs pointed to a gradual buildup of underlying inflation.

Low inflation is, however, helping to underpin consumer spending. Other data yesterday showed an unexpected increase in retail sales last month as heavy price discounting by automobile manufacturers lifted purchases of motor vehicles.

Rising retail sales and steadily firming underlying price pressures likely will keep the Federal Reserve on course to raise interest rates next month.

The Labor Department said its Consumer Price Index edged up 0.1 percent last month after jumping 0.5 percent in September. That lowered the year-on-year increase in the CPI to 2 percent from 2.2 percent in September. The increases were in line with economists’ expectations.

Gasoline prices fell 2.4 percent after surging 13.1 percent in September, which was the largest gain since June 2009. September’s jump in gasoline prices followed Hurricane Harvey, which struck Texas in late August and disrupted production at oil refineries in the Gulf Coast region.

Food prices were flat after nudging up 0.1 percent in September. Excluding the volatile food and energy components, consumer prices rose 0.2 percent in October amid a pickup in the cost of rental accommodation, healthcare costs, tobacco and a range of other goods and services.

The so-called core CPI gained 0.1 percent in September. October’s increase lifted the year-on-year gain in the core CPI to 1.8 percent. The year-on-year core CPI had increased by 1.7 percent for five straight months.

The slight pickup in the monthly core CPI could offer some comfort to Fed officials amid concerns that stubbornly low inflation might reflect not only temporary factors but developments that could prove more persistent.

The Fed’s preferred inflation measure, the personal consumption expenditures price index excluding food and energy, has consistently undershot the US central bank’s 2 percent target for more than five years. The Fed has lifted borrowing costs twice this year and has projected three rate increases in 2018.

Prices of US Treasuries declined and the US dollar pared losses against a basket of currencies after the data. US stock index futures extended losses.

Last month, owners’ equivalent rent of primary residence climbed 0.3 percent, quickening after September’s 0.2 percent increase. The cost of hospital services added 0.5 percent and prices for doctor visits rose 0.2 percent. There were also increases in prices for wireless phone services, airline fares, education and motor vehicle insurance.


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