Inflation rate slows in October, thanks in large part to a decline in gas prices. What else is down?
The U.S. inflation rate is slowing, thanks largely to a drop in energy prices, according to federal data released today that shows American consumers are getting a break at the gas pump even as food prices rise.
The Consumer Price Index – a commonly used measure of inflation – showed a drop of 0.1 percent in October, slowing the annual inflation rate to 3.5 percent from last month’s annualized rate of 3.9 percent, the U.S. Bureau of Labor Statistics (BLS) reported.
The subdued inflation rate may help appease investors and legislators who fear that the Federal Reserve’s attempt to stimulate the economy will ultimately spark inflation.
A decline in gas and fuel oil prices more than offset small increases in food, vehicles, health care, housing and other goods and services. According to the BLS, the price of gasoline fell 3.1 percent in October, after increasing in July, August and September. Despite the recent decline, gas has risen 23.5 percent over the past 12 months.
Even a small drop in gas prices leaves consumers with more discretionary income. According to the AAA Daily Fuel Gauge Report, gasoline prices now average $3.402 a gallon for regular gas. Last month, a gallon of regular cost $3.462. The drop helps explain why consumer spending rose slightly in October, even though income remained essentially flat.
The price of food rose at a slower rate in October, edging up by 1 percent after increasing 0.4 percent in September and rising at a rate of 4.7 percent over the last 12 months. Declining costs of fruits and vegetables, which fell 1.7 percent in October, help slow the rising prices at the grocery store and restaurants.
The index for all items except food and energy increased 0.1 percent in October. Housing costs rose 0.2 percent in October, with rents rising 0.4 percent and prices at hotels and motels declining 1.7 percent. Medical care rose at the faster-than-average rate of 0.5 percent, with fees for doctors’ services rising 0.5 percent and hospitals costs rising 0.7 percent. In contrast, prices for new cars and trucks is fell 0.3 percent, clothing fell 0.6 percent and airline fares dropped slightly.
Increases in medical care costs create a greater hardship for elderly investors, who spend a disproportionately greater amount of their income on health care. Advocates claim the elderly experience a higher inflation rate than consumers as a whole because of their need for health care.
In other financial news today, the U.S. Federal Reserve reported that industrial production expanded 0.7 percent in October after having declined a revised 0.1 percent in September. Factory output rose 0.5 percent and mining production was up 2.3 percent. Production was up 3.9 percent year-over-year, but remains at more than 5 percent below pre-recession levels measured in 2007.