U.S. CPI Rises Less Than Forecast

Prices paid by U.S. consumers rose less than forecast in April, reflecting declining costs for furniture and hotel stays that outweighed the biggest jump in food prices in 18 years.
TradingEconomics.com, Bloomberg 5/14/2008 6:08:12 AM

The consumer price index increased 0.2 percent after a 0.3 percent gain in March, the Labor Department said today in Washington. So-called core prices, which exclude food and energy costs, climbed 0.1 percent, compared with a 0.2 percent advance a month earlier.

Companies are holding down prices to attract customers after the economy grew at the slowest pace since the last recession over the last two quarters. Smaller gains in core prices are welcome news for Federal Reserve policy makers, who last month said uncertainty about the outlook for inflation was ``high.''

Excluding food and energy costs, prices were projected to rise 0.2 percent.

Prices rose 3.9 percent in the 12 months ended in April, down from a 4 percent year-over-year gain in March. The core rate increased 2.3 percent from April 2007, after increasing 2.4 percent in the 12 months ended in March.

Today's report showed energy expenses were unchanged after a 1.9 percent increase in March as gasoline prices dropped 2 percent. Fuel oil costs jumped 4.4 percent and natural gas prices climbed 4.8 percent.

The decrease in gasoline prices reflects government efforts to adjust the numbers for seasonal variations, Dana Saporta, an economist at Dresdner Kleinwort in New York, said before the report. The increase in prices at the pump was smaller than usual during April, causing the adjustment process to show a drop.

Energy costs have climbed this month and likely will continue to be a threat to inflation. Crude oil on the New York Mercantile Exchange touched a record $126.98 a barrel yesterday and the average cost of regular gasoline reached an all-time-high of $3.73 this week, according to AAA.

Food prices, which account for about a fifth of the CPI, jumped 0.9 percent, the most since January 1990. The increase was paced by rising costs for fresh fruits and pork.

The consumer price index is the government's broadest gauge of costs for goods and services. Almost 60 percent of the CPI covers prices that consumers pay for services ranging from medical visits to airline fares and movie tickets.

New vehicle prices dropped 0.2 percent and airline fares fell 0.5 percent. Costs for home furnishings and operations fell 0.1 percent, while the cost of staying at a hotel dropped 1.9 percent. Clothing costs increased 0.5 percent.

Investors project the Fed will keep the benchmark interest rate unchanged at its next meeting on June 25. That would be the first pause since the central bank started cutting rates in September.

Rising prices from overseas, reflecting the drop in the dollar, are another source of concern. U.S. businesses have leeway to boost prices as companies abroad charge more.

The government said yesterday that prices of imported goods rose 1.8 percent in April and were up 15.4 percent in the last 12 months, the most since records began in 1982.

The U.S. economy expanded at a 0.6 percent annual pace in the first quarter, according to Commerce Department data. Economists surveyed by Bloomberg News forecast growth would slow to 0.1 percent from April through June and consumer spending would advance at a 0.5 percent pace, the smallest increase in 17 years.


U.S. CPI Rises Less Than Forecast