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Consumer prices flat in September
2008-10-16
Consumer prices were flat in September as retreating costs for gasoline, clothes and new cars helped to offset rising prices for food, medical care and other things. The new reading on the Consumer Price Index, the government's most closely watched inflation barometer, came after prices actually dipped by 0.1 percent in August, the Labor Department reported Thursday. Those two months, however, had offered Americans a rare reprieve. Consumer prices have marched upward most of the year, spiking by an eye popping 1.1 percent in June. The toll of galloping prices for much of this year is eating into paychecks, further straining consumers who are pulling back sharply. Recent readings on retail sales were grim. The prospects that consumers will retrench further would spell more trouble for the already ailing economy. Stripping out energy and food products, "core" prices inched up by just 0.1 percent in September, an improvement from a 0.2 percent advance in August. The latest showing on inflation was better than economists expected. They were forecasting a 0.1 percent increase in overall prices and a 0.2 percent rise minus energy and food. So far this year, consumer prices have risen at an annualized pace of 4.5 percent, faster than the 4.1 percent increase for all of 2007. Core prices in the first nine months of this year have increased at a pace of 2.4 percent, matching the rise for all of last year. Paychecks continued to shrink. Weekly wages dropped by 2.5 percent in September compared to a year ago, the 12th straight month in which wages have been down. In other economic news, the number of new people signing up for unemployment benefits last week dropped. Even with the decline, new claims totaled 461,000 -- a figure associated with deep troubles in employment conditions. Indeed, the four-week moving average of jobless claims is at a seven-year high. And, the number of people continuing to collect jobless benefits rose to 3.7 million, the highest since late June 2003, when the labor market was still struggling to get back on its feet after the 2001 recession. Vanishing jobs, dwindling nest eggs and shrinking paychecks are straining millions of ordinary Americans. Economic anxiety is the voters overarching concern as they get ready to head to the polls in just a few weeks to select the country's next president. Whether that's Democrat Barack Obama or Republican rival John McCain, the next leader will be confronted by a troubled economy. Federal Reserve Chairman Ben Bernanke warned Wednesday that a quick rebound is not in the cards for the stumbling economy -- even if financial turmoil were to disappear. With the economy in for a period of weakness that could extend well into next year, inflation should also moderate, Bernanke and other Fed officials predict. Tamer inflation would give the Fed more leeway to slice rates again or at least keep them at low levels. Many economists believe there's a strong chance the Fed will lower rates at its next regularly scheduled meeting later this month. In an unprecedented assault on the financial crisis, the Fed and other major central banks together reduced rates last week. The Fed's main rate dropped to 1.50 percent, from 2 percent. Oil prices on Wednesday dipped below $75 a barrel for the first time in 14 months, suggesting gas prices will keep falling. Oil prices have plunged almost 50 percent since hitting a record high of $147.27 in mid July. The retreat in these and other commodity price "as well as the likelihood that economic activity will fall short of potential for a time, should lead to rates of inflation more consistent with price stability," Bernanke said.
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