MW: ECONOMIC REPORT: Consumer prices flat in September
Social Security benefits to rise 5.8% in January
By Ruth Mantell, MarketWatch
WASHINGTON (MarketWatch) -- Consumers got a break on inflation in September, the Labor Department reported Thursday, as overall U.S. consumer prices were unchanged, while energy prices declined and food prices rose.
The report for September should ease inflation fears a bit -- giving the Federal Reserve room to ease rates -- even as the government grapples with ongoing and widespread economic and financial problems.
Energy prices dropped 1.9% after seasonal adjustments, the September data showed. For the second consecutive month, food prices rose by 0.6%. In August, overall consumer prices declined 0.1%, following gains of 0.8% in July and 1.1% in June.
The government's core consumer price index, which excludes food and energy price inputs, rose 0.1% in September.
Economists surveyed by MarketWatch had been looking for both the overall and core readings of retail-level inflation to rise by 0.2%. See Economic Calendar.
Inflation has peaked, wrote Ian Shepherdson, chief U.S. economist with High Frequency Economics, who sees "huge declines" coming in the overall number, and a slower core as well. He added that there should be some relief over coming weeks in food prices as global prices have "dropped sharply" in recent weeks.
The CPI has risen 4.9% in the past year. Growth in the core rate has been 2.5%, a little faster than the Federal Reserve would prefer. The Labor Department also reported that real average weekly earnings for September were down 2.5% from the prior year.
Brian Bethune, chief U.S. financial economist for Global Insight, wrote that "extremely weak" domestic demand has limited pricing power at the retail level
"Indeed, prices of vehicles and computers dropped sharply," Bethune wrote. "Consumer price inflation has gone dormant, as the recent abrupt slowdown in world economic growth has led to sharp declines in energy costs, while weak domestic demand is putting downward pressure on retail prices in many key markets."
On Wednesday, the government reported that U.S. producer prices fell 0.4% in September -- the second consecutive month of declines -- as energy prices dropped and food prices rose.
The government also announced Thursday that the new cost of living adjustment for Social Security benefits is 5.8% -- the highest rate since 1982. The benefits' adjustment for inflation is calculated based on consumer price index data.
Also Thursday, the Labor Department reported that first-time claims for state unemployment benefits dropped 16,000 to 461,000 in the week ended Oct. 11. The four-week average of those claims rose 750 to 483,250 -- the highest level since October 2001. See Economic Report.
