Washington, DC, November 16, 2006--The consumer price index eased in October, led by falling prices for gasoline and cars, the Labor Department reported Thursday.
The consumer price index fell 0.5% for the second month in a row, led by falling gas and car prices. Core inflation, which excludes food and energy prices, rose 0.1%, the slowest pace in eight months.
The figures provide hope that inflationary pressures are moderating, and could give the Federal Reserve room to cut interest rates if the economy slows too much over the next few quarters.
The numbers were much better than expected. Economists were forecasting the CPI to fall 0.2% and the core rate to rise 0.2%.
The core inflation rate has now risen 2.7% in the past year, down from a five-year high of 2.9% a month ago. In the past three months, the core rate has risen at a 2.3% pace, near the top of the Federal Reserve's comfort zone.
The CPI is up 1.3% in the past year, the slowest inflation since June 2002. In the past three months, the CPI has fallen at a 2.9% annual rate, as gasoline prices have plunged.
With inflation falling in October, real weekly wages increased 1.3% from September. Real weekly earnings (adjusted for inflation) are up 3.2% in the past year.
Energy prices fell 7%, as gasoline prices dropped 11.1%. Natural gas prices fell a record 7.7%. Energy prices are down 11.3% in the past year.
Housing prices were flat in October, due to falling fuel bills and hotel fares. Rents and owners' equivalent rent both rose 0.4%.
Transportation costs fell 3.1% on lower fuel bills. New car prices fell 0.1% and air fares fell 1.4%.
Apparel prices fell 0.7%, reversing September's 0.6% gain. Medical care prices rose 0.3%. Hospital services prices rose 0.4%, while drug prices fell 0.2%.
Food prices rose 0.3%, led by higher prices for vegetables, dairy and beef.
