14 October 2005, 17:06  U.S. inflation surges 1.2%, a 25-year high

U.S. consumer inflation surged at the fastest pace in more than 25 years in September, rising a bigger-than-expected 1.2%, the Labor Department said Friday. A record 12% rise in energy prices fueled the historic jump in consumer price index, but core inflation - which excludes food and energy - increased just 0.1%. Energy goods and services accounted for more than 90% of the increase in the CPI. Economists were expecting the CPI to rise 0.9% and the core CPI to rise 0.2%, according to a survey conducted by MarketWatch. Consumer inflation has now risen 4.7% in the past 12 months, the highest since 1991. Core inflation is up 2% in the past year, down from 2.1% in August. The report should keep the Federal Reserve on track for more interest rates hikes at coming meetings. While the core CPI was contained, that was largely due to several special factors unlikely to be repeated in coming months. Core inflation remains the Federal Reserve's central concern. With little power to control energy costs, the Fed must focus on keeping rising energy costs from being accommodated by higher wages or prices for other goods and services. Wage pressures are nonexistent. In a separate report, the Labor Department said average weekly earnings fell 1.2% after adjusting for inflation. Real average hourly earnings are down 2.4% in the past year, while real average weekly earnings are down 2.7%, the biggest drop in 14 years. The big story in the CPI was energy, which surged a record 12% after Hurricanes Katrina and Rita devastated oil and gas production and distribution from the vital Gulf Coast region. Gasoline prices jumped a record 17.9%, while natural gas prices rose 12.1%. Fuel oil prices rose 12.7%. Energy prices are up 34.8% in the past year. Shelter costs fell 0.1% in September, holding the core CPI down in September. Hotel and motel room rates plunged 2.5%, while rents and homeowner equivalent rent both increased 0.1%. Many economists were expecting an increase in hotel prices. Food prices increased 0.3% on higher prices for fruits, vegetables and poultry. Medical care prices increased 0.3% and are up 3.9% in the past year. Apparel prices fell 0.1%. Transportation prices rose 5.1% on higher fuel costs. New car prices rose 0.4%, while airfares fell 1.4%.

© 1999-2024 Forex EuroClub
All rights reserved