WASHINGTON - U.S. consumer prices increased only slightly in September, as higher energy costs offset flat food prices. The figures are the latest evidence that slow economic growth is keeping inflation tame.
The consumer price index rose a seasonally adjusted 0.2 percent in September, the Labor Department said Wednesday. That’s up from 0.1 percent in August. Gas, electricity and other energy costs rose 0.8 percent, making up about half the overall increase.
The index is the broadest of three price gauges from the Labor Department because it includes goods and services. About 60 percent of the index covers prices consumers pay for services from medical visits to airline fares, movie tickets and rents.
In the past year, consumer prices have increased just 1.2 percent, down from a 1.5 percent annual gain in August. That’s the smallest 12-month gain since April, and it’s below the Federal Reserve’s 2 percent inflation target.
Excluding volatile food and energy costs, core prices rose just 0.1 percent and are up 1.7 percent in the past 12 months.
High unemployment and meager wage increases have made it difficult for Americans to pay more for most goods. That has also made it hard for retailers to charge more.
With inflation below the Fed’s target, the central bank faces less pressure to scale back its $85 billion a month in bond purchases. The bond purchases are intended to keep long-term inflation rates low and stimulate economic growth. But critics fear it raises the risk of higher inflation.
“There really isn’t any inflation pressure in the U.S,” said Julia Coronado, chief economist for North America at BNP Paribas in New York and the top-ranked consumer price index forecaster over the past two years, according to data compiled by Bloomberg. “That means the Fed can focus more on the employment side of its mandate and is not constrained in any way by inflation developments.”
Extremely low inflation may even increase pressure on the Fed to extend the purchases. Some Fed officials have objected to slowing the bond buying program when inflation is well below 2 percent. A small amount of inflation can be good for the economy because it encourages consumers and businesses to spend and invest before prices rise further.
Paul Dales, an economist at Capital Economics, said price gains have picked up in the past few months, a sign “the Fed needn’t worry too much about low inflation.”
Prices for clothing and hotels fell, while airline fares, new car prices and rents rose.Fruit and vegetable prices dropped, offsetting increases in meat, breads and dairy products.
September’s report also includes data used by the Social Security Administration to calculate cost-of-living adjustments for 58 million Social Security beneficiaries. Mild inflation means benefits will increase 1.5 percent next year, among the smallest increases since the automatic adjustments began in 1975.
The consumer price figures were originally scheduled to be released Oct. 16. But they were delayed by the 16-day partial government shutdown.
The shutdown has likely slowed growth in an already weak economy. Economists expect economic growth at an annual rate of between 1.5 percent and 2 percent from July through September. That would be down from a 2.5 percent annual rate in the April-June quarter.
And economists expect little pickup in the October-December quarter. The shutdown likely cut a quarter to a half percentage point from growth in the final three months of the year.
Information for this article was contributed by Victoria Stilwell of Bloomberg News.
Business, Pages 30 on 10/31/2013