Consumer prices in U.S. fell more than forecast in November

The cost of living fell more than forecast in November as energy prices dropped, a sign U.S. inflation remains in check.

The 0.3 percent decrease in the consumer-price index was the first drop since May and followed a 0.1 percent gain the prior month, the Labor Department reported today in Washington. The median estimate of 80 economists surveyed by Bloomberg called for a 0.2 percent drop. The core index, which excludes volatile food and energy costs, climbed less than projected.

Facing little threat of inflation, Federal Reserve policy makers this week expanded asset purchases in a continuing bid to reduce unemployment and spur growth. Department stores including the Gap Inc., Macy’s Inc. and J.C. Penney Co. are offering sales in the midst of the holiday shopping season as concern over possible changes in tax rates and government spending hurts consumer confidence.

“Inflation is largely a non-issue,” Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania, said before the report. “There’s not enough pricing power in the U.S. because of the fairly modest expansion.”

Stock-index future held earlier gains after the report. The contract on the Standard & Poor’s 500 Index maturing in March rose 0.1 percent to 1,412.8 at 8:32 a.m. in New York. Treasury securities climbed, sending the yield on the benchmark 10-year note down to 1.71 percent from 1.73 percent late yesterday.

Fed Policy

This week, Fed policymakers linked interest rates to unemployment and inflation. Rates will remain low “at least as long” as unemployment remains above 6.5 percent and inflation is projected to be 2.5 percent or lower, the FOMC said in a statement.

“Longer-term inflation expectations continue to be well anchored,” Federal Reserve Chairman Ben S. Bernanke said at a press conference Wednesday.

Bloomberg survey estimates for the consumer-price index ranged from a drop of 0.3 percent to an increase of 0.1 percent.

In the 12 months ended in November, consumer prices rose 1.8 percent, today’s report showed.

The core CPI reading increased 0.1 percent last month following a 0.2 percent gain in October. For the past 12 months, core prices were up 1.9 percent, compared with a 2 percent advance for the year through October.

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