The cost of living in the U.S. fell in November by the most in almost six years, depressed by falling energy prices that signal inflation will stay below the Federal Reserve’s goal well into 2015.
The consumer-price index dropped 0.3 percent, the most since December 2008, after being little changed the prior month, a Labor Department report showed today in Washington. The median forecast of 84 economists surveyed by Bloomberg called for a 0.1 percent fall. Costs rose 1.3 percent over the past year, the least since February. Excluding volatile food and fuel, the so- called core measure rose at a slower pace than in October.
Persistently low inflation allows Fed policy makers, scheduled to end a two-day meeting today, to exercise patience in raising the benchmark interest rates that they’ve held near zero since 2008 to spur growth and trim unemployment. Plunging fuel costs also will free up money that households can spend on other goods and services, bolstering the economic expansion.
“There really aren’t any inflationary pressures, even outside of energy,” Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh, who is among the most accurate CPI forecasters over the past two years, according to data compiled by Bloomberg. “Time is still on the Fed’s side.”
Stock-index futures held earlier gains after the report. The contract on the Standard & Poor’s 500 Index maturing in March climbed 0.4 percent to 1,973.6 at 8:34 a.m. in New York.
Estimates for consumer prices in the Bloomberg survey ranged from little change to a drop of 0.3 percent.
Core prices rose 0.1 percent, matching the median forecast of economists surveyed by Bloomberg. That followed a 0.2 percent advance the previous month.
Gains in rents, medical care and airline fares were almost completely offset by the biggest drop in clothing costs in 16 years and the largest fall in prices for used cars and trucks since September 2012.
Today’s report showed the core CPI measure increased 1.7 percent from November 2013, following a 1.8 percent rise in the prior 12-month period.
Energy costs decreased 3.8 percent from a month earlier, led by a 6.6 percent plunge in gasoline, the biggest since December 2008.
Households’ fuel bills continue to fall. The average cost of regular gasoline dropped to $2.51 a gallon on Dec. 16, the cheapest since 2009 and down from this year’s high of $3.70 reached in April, according to AAA, the biggest U.S. auto group.
Lower prices at the pump mean Americans can spend more elsewhere. Retail sales rose 0.7 percent in November, the most in eight months, as consumers snapped up electronics, clothing and furniture, Commerce Department figures showed. Industry data also indicate demand for vehicles remains robust.
The cost of living decline helped boost paychecks. Hourly earnings adjusted for inflation rose 0.6 percent, after a 0.1 percent increase the prior month, a separate report from the Labor Department showed. They were up 0.8 percent over the past 12 months, the most since February.
The Fed’s preferred price gauge, linked to consumer spending, rose 1.4 percent in October compared with the same month last year and hasn’t been above the central bank’s 2 percent goal since March 2012.
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