Washington, D.C., USA: The Labor Department released a report on Wednesday showing consumer prices in the U.S. increased in line with economist estimates in the month of October – partly reflecting a jump in energy prices, .
The Labor Department said its consumer price index rose by 0.3 percent in October after inching up by 0.1 percent in September. Economists had expected prices to climb by 0.3 percent.
Over one-third of the increase in consumer prices was due to a spike in gasoline prices, which soared by 3.0 percent in October after dipping by 0.2 percent in September.
Prices for electricity also surged up by 2.3 percent, contributing to a 2.4 percent jump in energy prices in October following a 0.5 percent drop in the previous month.
Excluding the significant rebound in energy prices as well as a modest drop in food prices, core consumer prices edged up by 0.2 percent in October after creeping up by 0.1 percent in September. The uptick in core prices also matched expectations.
The modest increase in core consumer prices was partly due to notable growth in prices for shelter and used cars and trucks
Prices for medical care, household furnishings and operations, motor vehicle insurance, and tobacco also rose, while prices for communication, new vehicles, and recreation declined.
While the report also said the annual rate of consumer price growth accelerated to 2.5 percent in October from 2.3 percent in September, the annual rate of core consumer price growth slowed to 2.1 percent from 2.2 percent.
“The rebound in CPI inflation to 2.5% in October, from 2.3%, was mostly driven by a rise in gasoline prices which will be more than reversed over the next couple of months,” said Andrew Hunter, U.S. Economist at Capital Economics.
He added, “The rest of the report supports our view that underlying inflation is unlikely to rise much further from here.”
Last Friday, the Labor Department released a separate report showing a much bigger than expected increase in producer prices in the month of October.
The Labor Department said its producer price index for final demand climbed by 0.6 percent in October after rising by 0.2 percent in September. Economists had been expecting another 0.2 percent uptick.
Excluding food and energy prices, core producer prices still rose by 0.5 percent in October after edging up by 0.2 percent in September. Core prices had been expected to rise by another 0.2 percent.
Compared to the same month a year ago, producer prices in October were up by 2.9 percent, reflecting an acceleration from the 2.6 percent increase in September.
The annual rate of growth in core consumer prices also accelerated modestly to 2.6 percent in October from 2.5 percent in September.
Consumer Price Index (CPI)
The Consumer Price Index (CPI) measures the change in prices paid by consumers for goods and services. The CPI reflects spending patterns for each of two population groups: all urban consumers and urban wage earners and clerical workers. The all urban consumer group represents about 93 percent of the total U.S. population. It is based on the expenditures of almost all residents of urban or metropolitan areas, including professionals, the self-employed, the poor, the unemployed, and retired people, as well as urban wage earners and clerical workers.
Not included in the CPI are the spending patterns of people living in rural nonmetropolitan areas, farming families, people in the Armed Forces, and those in institutions, such as prisons and mental hospitals.
Consumer inflation for all urban consumers is measured by two indexes, namely, the Consumer Price Index for All Urban Consumers (CPI-U) and the Chained Consumer Price Index for All Urban Consumers (C-CPI-U).
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is based on the expenditures of households included in the CPI-U definition that meet two requirements: more than one half of the household’s income must come from clerical or wage occupations, and at least one of the household’s earners must have been employed for at least 37 weeks during the previous 12 months.
The CPI-W population represents about 29 percent of the total U.S. population and is a subset of the CPI-U population.
The CPIs are based on prices of food, clothing, shelter, fuels, transportation, doctors’ and dentists’ services, drugs, and other goods and services that people buy for day-to-day living. Prices are collected each month in 75 urban areas across the country from about 5,000 housing units and approximately 22,000 retail establishments (department stores, supermarkets, hospitals, filling stations, and other types of stores and service establishments).
All taxes directly associated with the purchase and use of items are included in the index. Prices of fuels and a few other items are obtained every month in all 75 locations.
Prices of most other commodities and services are collected every month in the three largest geographic areas and every other month in other areas. Prices of most goods and services are obtained by personal visits or telephone calls by the Bureau’s trained representatives.
U.S. stocks fell on Wednesday, with the S&P 500 notching a fifth straight day of losses as financial stocks were hit by fears of tightening regulations on the banking industry.
Based on the latest available data, the Dow Jones Industrial Average .DJI fell 204.84 points, or 0.81 percent, to 25,081.65, the S&P 500 .SPX lost 20.36 points, or 0.75 percent, to 2,701.82 and the Nasdaq Composite .IXIC dropped 64.48 points, or 0.9 percent, to 7,136.39.