U.S. CPI Rise in September on Food, Fuel


Prices paid by U.S. consumers rose more than forecast in September as food and energy costs climbed, while the core measure that excludes those items showed inflation remains contained.

The 0.3 percent increase followed a 0.1 percent decline in August prompted by falling oil prices, the Labor Department said today in Washington. So-called core prices rose 0.2 percent for a second month in line with forecasts.

With inflation under control, Federal Reserve policy makers have leeway to consider cutting their benchmark rate again later this month to keep the economy growing in the face of a deepening housing recession. Fed Chairman Ben S. Bernanke this week reiterated the central bank would ``act as needed'' to foster sustainable growth along with price stability.

``A slower economy and additional slack in the labor market should help keep inflation under control,'' Ethan Harris, chief economist at Lehman Brothers Holdings Inc. in New York, said before the report. ``Tame inflation and weaker growth imply additional rate cuts.''

Another government report showed housing starts in the U.S. plunged more than forecast to a 14-year low in September, keeping the real-estate market the Fed's top concern. The 10.2 percent decrease to an annual rate of 1.191 million followed a 1.327 million rate the prior month, the Commerce Department said today in Washington. Building permits fell 7.3 percent to a 1.226 million pace.

Economists had forecast consumer prices would rise 0.2 percent, according to the median of 82 projections in a Bloomberg News survey. Estimates of the increase ranged from no change to a 0.5 percent gain.

Core prices were forecast to rise 0.2 percent.

12-Month Increase

Over the past 12 months, consumer prices rose 2.8 percent, compared with a 2.0 percent rise in the 12 months through August, the lowest since October 2006. Consumer prices excluding food and energy rose 2.1 percent in the year through September, the same as in the 12 months ended in August.

Today's report showed energy prices rose 0.3 percent, the first increase since May, after declining 3.2 percent in August. Gasoline prices rose 0.4 percent.

Food prices, which account for about a fifth of the CPI, rose 0.5 percent after a 0.4 percent increase in August.

Housing costs, which include some energy costs and account for two-fifths of the total consumer price index, rose 0.3 percent after no change. Owner's equivalent rent, which makes up 30 percent of the core CPI, increased 0.3 percent after rising 0.2 percent.

Rent Increases

Rent increases have been slowing as the housing market is bogged down in its worst recession in 16 years. Declining home construction has detracted from growth for a year and a half and is weakening the consumer spending that makes up 70 percent of the economy.

Medical-care costs rose 0.3 percent after increasing 0.5 percent. Clothing prices climbed 0.3 percent following a 0.5 percent decline. Auto prices dropped 0.3 percent.

Almost 60 percent of the CPI covers prices that consumers pay for services ranging from airline fares to movie tickets and laundry charges.

The growth outlook for the rest of 2007 has deteriorated since mid-August, when concern over defaults on subprime mortgages squeezed access to credit, prompting further declines in home sales and construction.

The economy will grow 2 percent this year, the least since 2002, according to a Bloomberg survey of economists taken the first week of October. Economists had projected a 2.5 percent rate of expansion at the start of the year.

 


Bloomberg
10/17/2007 6:20:03 AM