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U.S CPI Rise 0.4% In October

By Arthur Greene November 17, 2016
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The U.S consumer-price index accelerated in October for the third-straight month largely due to rising energy costs, the latest sign inflation pressures in the economy are firming. The U.S consumer price index rose 0.4% in October with the annual inflation rate at 1.6% from 1.2% previously and this increase was in line with market expectations. This was the highest annual inflation rate since October 2014 and the data overall will maintain expectations of a December Fed rate hike.

Compared to a year earlier, overall prices grew 1.6% in October. Core prices grew 2.1% from a year earlier.

Within the core CPI basket, housing continued its upward march in October. Rents increased 0.4 percent last month and owners’ equivalent rent of primary residence rose 0.3 percent after gaining 0.4 percent in September.

The CPI report showed energy prices in October rose 3.5%. Gasoline costs were up 7%, but down 0.9% from a year earlier.

Shelter costs, which account for a third of the index, rose 0.4% last month, and were up 3.5% from a year earlier.

Food prices were flat for the fourth straight month in October.

Medical care costs were unchanged for a second month as a rise in hospital services was offset by a decline in the cost of doctor visits. Prices for prescription medicine rose 0.2 percent, slowing from September’s 0.8 percent gain. There were increases in the prices of a range of other goods last month, including new motor vehicles and apparel. Economists attribute the discrepancy to different methodologies.

"We're seeing a gradual uptrend in inflation," Mike Englund, chief economist at Action Economics in Boulder, Colorado, said before the report. "It's one more factor that locks in a Fed hike in December."

Fed Chairwoman Janet Yellen cited stronger inflation readings when telling members of Congress on Thursday that the case for a rate increase has “strengthened.”

“As the labor market strengthens further and the transitory influences holding down inflation fade, I expect inflation to rise to 2%,” she said in written testimony released earlier today.

The cost-of-living increase offset most of the gain in paychecks in October, a separate report from the Labor Department showed Thursday. Hourly earnings adjusted for inflation rose 0.1 percent from the prior month. They were up 1.2 percent over the past 12 months.

Firming inflation and a healthy job market have laid the groundwork for Fed officials to raise interest rates when they meet next month. With energy costs grinding higher, price pressures will have room to gain traction more broadly in the economy, while companies may begin to gain greater pricing power amid steady consumer demand.

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By Arthur Greene November 17, 2016
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