Consumer prices were unchanged in November, government data show

The prices paid by consumers for a variety of goods and services were unchanged in November, mainly because of declining energy costs, government data showed Friday.

The Labor Department said the consumer price index was flat last month, matching the forecast of economists surveyed by MarketWatch.

After spiking earlier this year, overall inflation has begun to moderate in conjunction with declining prices of key commodities, such as oil, that play a significant role in the cost of consumer goods and services. Although consumer prices are still 3.4% higher compared with 12 months ago, that’s down from June’s annualized rate of 3.9%.

“The pace of inflation has clearly moderated in recent months, and is expected to continue to ease in the months ahead,” said Jim Baird, chief investment strategist at Plante Moran Financial Advisors.

The core rate of inflation, which excludes volatile food and energy prices, rose 0.2% in November to mark the biggest increase since August. Economists had expected a rise of 0.1%.

In the last 12 months, core prices have risen 2.2%, the largest year-over-year increase since 2008.

Economists say the buildup in the core rate reflects price increases at the wholesale level earlier in the year that are now winding their way through the economy. Core prices could taper off in the near future, however, if commodity prices remain flat or fall even further.

Because the core rate strips out volatile food and energy inputs, it’s viewed by the Federal Reserve as a better indicator of long-term inflationary trends.

Some economists say softer inflation could give the Fed the necessary leeway to buy more debt — a controversial tactic known as quantitative easing — as a means to lower interest rates and spur faster growth.

Yet lower inflation, combined with a slew of reports showing the economy gaining some momentum, could also allow the U.S. central bank to stand pat. Some critics contend that the Fed’s previous debt-buying policies contributed to higher inflation.

The moderation in consumer prices appears to be one of several major factors contributing to an improved U.S. economy since an early summer lull.

Lower inflation means Americans can buy more with the same amount of money, thereby improving living standards. And since consumer spending accounts for as much as 70% of U.S. growth, the economy can grow faster and add jobs more rapidly.

That wasn’t the case earlier in the year, and inflation will have to ease further to reduce the financial strain millions of people have been experiencing. Higher consumer prices have easily outstripped inflation-adjusted wage increases in the last 12 months, so Americans have had to make do with less.

In November, for example, average hourly wages fell 0.1% to $10.22, adjusted for inflation. Real wages have fallen 1.5% since November 2010.

The surge in inflation since the fall of 2010 was largely driven by higher energy prices, but those costs continue to come down. The energy index fell 1.6% last month, after a 2% drop in October. Lower gasoline prices accounted for most of the decline.

The price of energy is still 12.4% higher compared with a year ago.

Food prices, meanwhile, rose 0.1% last month, largely because of higher prices for cereal, baked goods and nonalcoholic drinks. The cost of vegetables, fruit, dairy, meat, poultry and fish all declined.

Food prices are up 4.6% in the last 12 months.

Bartash writes for MarketWatch.com/McClatchy.