Consumer Prices Off For First Drop in Seven Months
Washington, DC, Dec. 16--Consumer prices fell for the first time in seven months in November.
The consumer-price index dropped 0.2%, after a flat reading in October, the Labor Department reported Tuesday. The "core" index, which excludes volatile food and energy prices, fell 0.1%, the first decline in that gauge in 21 years. In annual terms, the core increase was 1.1%, a 37-year low.
Economists had expected the overall index to remain unchanged, and for the core index to climb 0.1%, according to a survey by Dow Jones Newswires and CNBC.
The CPI data were a "mild surprise," noted William Sullivan, an executive director at Morgan Stanley. "This is an interesting reading on retail inflation," since it "occurs against the backdrop of superheated economic growth," he says. "It fits in with the [Federal Reserve's] notion that the economy can grow rapidly without [producing] any meaningful price pressures."
Steven Wood, chief economist at Insight Economics, attributed the lack of pricing pressure to "intense competitive pressures, robust productivity gains, and still widespread slack in the economy," in a note to clients. But he predicts that inflation will turn higher in 2004.
Energy prices, which account for 7% of the index, fell for a second straight month, as did gasoline prices. Energy prices fell 3%, while gasoline costs shed 5%. Food prices grew 0.4%.
Housing prices, which account for 40% of the index, slipped 0.1%. Transportation prices declined 1.3%. Airline fares fell 2.6%, but prices of new motor vehicles were unchanged.
Medical-care prices, however, continued to rise, climbing 0.3%, the same rate as in October. Prices of hospital-related services rose 1.2%, marking the largest increase in more than 13 years.
