Price Cuts Keep Tight Lid on Inflation
Prices of computers, televisions and toys have all declined recently, helping hold November’s consumer price increase to a modest 0.2%, according to government figures released Tuesday.
The increase--the sixth consecutive one at or below that muted level--brought the inflation rate in consumer prices for the first 11 months of the year to 1.6%, even better than the 11-year low of 1.7% for all of last year, the Labor Department said.
Audio and video equipment prices fell 0.3% and computer prices plunged 2.8%. Toy prices also were down.
“This is a very good report for the U.S. economy and American consumers,” said Martin Regalia, chief economist with the U.S. Chamber of Commerce. “Inflation continues to remain low--particularly in the petroleum and energy sectors--and shoppers will enjoy lower prices throughout the holiday season.”
The so-called core rate of inflation, which excludes the volatile food and energy categories, rose just 0.2%, the fifth consecutive month at that modest reading.
For November, energy prices were unchanged from a month earlier but were down 9.2% from a year ago. A big 1.2% decline in gasoline pump prices last month and a 0.7% fall in home heating oil offset rising costs for natural gas and electricity.
Food prices moderated in November, rising by a slight 0.1% after a sharp 0.6% rise in October. The price of vegetables, oranges, pork and poultry all dropped.
The good news for shoppers translates into a profit problem for some U.S. companies. Many have been forced to pay higher wages to attract and retain qualified workers. But they can’t raise their prices and also compete against imports from countries whose currencies have been devalued as a result of the world economic crunch that began last year in Asia.
Federal Reserve policymakers are scheduled to meet next Tuesday for the last time this year. Analysts expect they’ll leave rates unchanged, but many think additional rate cuts could come early next year.
“The lack of inflationary pressures provides the Fed with all the room it needs to cut interest rates again at the first sign of even a slight weakness in the economy,” said economist Joel L. Naroff of First Union Corp. in Philadelphia.
In a separate report, the Commerce Department said business inventories rose 0.3% but that the ratio of inventories to sales was unchanged at 1.39 months for the third straight month.
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Consumer Price Index
Monthly percentage change, seasonally adjusted:
1998, November: +O.2%
Source: Bureau of Labor Statistics
