/www.bloomberg.com/ By Carlos Torres
Washington, Oct. 18 (Bloomberg) -- U.S. consumer prices rose in September, led by increases in the cost of energy, medical care, and new cars, a government report showed.
The 0.2 percent gain in the consumer price index, the most widely followed inflation measure, follows a 0.3 percent increase in August, the Labor Department said. Excluding volatile food and energy costs, the index increased 0.1 percent after rising 0.3 percent the prior month.
Costs for services, the biggest element in the index, rose 0.2 percent in September, down from a 0.4 percent increase the prior month. Northwest Airlines Corp., the fourth-largest U.S. carrier, said yesterday it lost $46 million in the third quarter, in part because its average fares declined 1.4 percent.
``We don't have any nascent inflation trends out there,'' said Adrienne Warren, a senior economist at Scotia Capital in Toronto. ``Pricing power is still very limited.''
Economists had expected a 0.2 percent increase in the consumer price index, based on the median of 60 forecasts in a Bloomberg News survey, and also a 0.2 percent rise in prices excluding food and energy.
Service costs are likely to rise at a faster pace as the economy slowly recovers from recession, economists said. Tenet Healthcare Corp., the second-biggest hospital chain, this month raised profit estimates for the year after it increased prices for managed-care insurers and treated more patients.
Through September, the CPI rose at a 2.6 percent annual pace, compared with a 2.7 percent increase in the same period last year. The core rate rose at a 2.1 percent pace, compared with a 2.8 percent gain through September of last year.
Year Over Year
Treasury securities rose following the report. The 4 3/8 percent note maturing in August 2012 rose 11/32 at 9:30 a.m. New York time. Its yield fell 5 basis points to 4.16 percent.
Separately, the Commerce Department reported the U.S. trade deficit widened in August to a record $38.5 billion, as oil prices surged and companies stepped up imports in anticipation of a threatened shutdown of West Coast ports.
Consumer prices were 1.5 percent higher for the 12 months through September, compared with a 1.8 percent year-over-year increase through August. Excluding food and energy, prices were 2.2 percent higher over the past 12 months.
Subdued inflation has enabled Federal Reserve policy makers to hold the overnight bank lending rate at a 41-year low to encourage the economic rebound.
``Inflation remains low and well contained,'' Michael Moskow, president of the Chicago Federal Reserve Bank, said in a speech yesterday. ``This has allowed monetary policy to maintain an accommodative stance for an extended period of time'' and ``bolsters demand throughout the economy.''
Energy Prices
Inflation is likely to pick up as the economic recovery gathers momentum. Growth will probably accelerate to 3 percent next year from 2.4 percent in 2002, according to this month's Blue Chip Economic Indicators consensus forecast.
Consumer prices will probably rise 2.3 percent next year, the Blue Chip survey found. Consumer prices have risen an average 2.5 percent a year over the past decade.
Energy prices, which account for about a 12th of the index, rose 0.7 percent in September after increasing 0.6 percent the prior month. Prices for gasoline and natural gas both jumped 1 percent.
Gasoline and energy price increases ``if sustained over a long period of time, could suppress incomes and spending,'' said Kathy Bostjancic, a senior economist at Merrill Lynch & Co. in New York, before the report.
Food prices, which account for about a fifth of the index, increased 0.2 percent in September after falling 0.1 percent the month before. Last month's increase was led by higher prices for fresh fruit and poultry.
Service Costs The CPI is the government's broadest gauge of costs for goods and services. Almost 60 percent of the CPI covers prices consumers pay for services, ranging from medical visits to airline fares and movie tickets. Goods, including food, clothing, autos and appliances, make up the rest.
Service prices are up 3.2 percent over the past 12 months. The cost of medical care increased 0.3 percent last month after a 0.2 percent rise in August.
Tenet Healthcare reported that net income for the fiscal first quarter more than doubled. The company said it now expects per-share earnings to increase at least 25 percent in its full fiscal year. Its previous estimate was an increase of less than 20 percent.
Air Fares, Cars
U.S. health-care spending rose 10 percent last year, the biggest jump in more than a decade, according to a study by the Center for Studying Health System Change, a policy research organization. Hospitals accounted for more than half of the health- care spending increase.
Housing costs, which include some energy costs and account for one-third of the index, rose 0.1 percent in August after increasing 0.3 percent. A category designed to track rental prices rose 0.2 percent.
Airfares fell 2.1 percent last month, the biggest decline since November.
New car prices rose 0.5 percent last month after falling 0.1 percent in August. General Motors Corp., the world's largest carmaker, pulled back on much of its zero-interest financing in September, only to revive it this month for most 2003 cars and minivans after its September sales fell 13 percent compared with a year earlier.
Clothing costs rose 0.1 percent last month following a 1.1 percent surge in August. Prices for household furnishings and operations fell 0.2 percent after falling 0.3 percent.
Ethan Allen, the largest U.S. furniture retailer, cut prices as much as 20 percent effective Oct. 4. The company said this week that first-quarter profit rose 20 percent as sales were up 4.7 percent.