US consumer prices up 0.3 per cent in October
Posted: 19 November 2009 0400 hrs

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WASHINGTON: US consumer prices rose by a higher-than-expected 0.3 per cent in October primarily on the back of higher gasoline prices, government data showed Wednesday.

The Labor Department report showed inflation slightly hotter than expected, but raised few concerns among economists worried more about deflationary pressures than rising prices.

The consumer price index (CPI) showed a year-over-year decline of 0.2 per cent.

Core prices, sometimes seen as a more reliable indicator of trends, showed a 0.2 per cent month-over-month increase and a year-to-year pace of 1.7 per cent, which is seen as moderate.

Most economists had expected a 0.2-per-cent rise in the headline CPI and a 0.1-per-cent gain in the core index, which excludes volatile food and energy costs.

Analysts said the report appeared to confirm that prices remained mostly in check, and that deflation remains a potential concern.

"Despite the slight increase in top-line inflation, there is nothing to suggest that prices will increase sharply in the near term," said Andres Carbacho-Burgos at Moody's Economy.com, who predicted the Federal Reserve would maintain easy money to support economic recovery.

"Deflation is so far still the most important downside risk, with the remaining inflation risks still riding more on the vagaries of energy prices rather than on monetary policy."

Price increases were led by energy, whose index jumped 1.5 per cent, rising for the fifth time in the last six months. Costs for gasoline, fuel oil, natural gas, and electricity all increased.

Costs for used cars and trucks and for new vehicles both rose sharply and together accounted for over 90 per cent of core prices increases, the department said.

The end of the government's "cash for clunkers" incentives resulted in higher prices for cars, which contributed to the CPI increase, officials and analysts said.

Cash for clunkers also appears to be boosting used car prices, which rose 3.4 per cent in October, largely due to reduced supply of some vehicles resulting from the scrappage programme.

Elsewhere, housing showed some troubles with rental costs falling 0.1 per cent.

Dean Maki at Barclays Capital said weakness in rental prices "is more than offset by strengthening in sectors that are more sensitive to economic growth and energy costs" and added that the overall report "should continue to ease any lingering fears of deflation."

- AFP/yb