Inflation Stays Subdued Despite Jump in Gas Prices

Inflation in the U.S. economy remained tame in October despite a sharp rise in gasoline costs, government figures showed Tuesday.

The consumer price index, the government’s main inflation gauge, increased by 0.2% after remaining flat in September, the Labor Department said.

The closely watched core CPI, which excludes volatile food and energy costs, also rose by 0.2% last month after an identical rise in September.

“We are still not seeing any signs of inflation picking up,” said Christine Chmura, economist at Crestar Financial Corp. in Richmond, Va. “We still have prices rising faster for services. In the goods sector, there is virtually no inflation.”

In a separate report, the Commerce Department said inventories of unsold goods at the nation’s businesses rose 0.6% in September, the strongest monthly addition to stocks since a matching 0.6% gain last March. But sales rose by a bigger 0.8%, decreasing the likelihood that stockroom backlogs will slow the economy.

The readings for both the overall CPI and the core index matched the forecasts of U.S. economists in a Reuters survey.

The CPI gain was muted even though gasoline prices surged 2.7% in October, their largest monthly gain since a 4.6% rise in August 1997. But economists noted the rise was a rebound from the drop in prices earlier this year.

The rise in gasoline prices was partly offset by declines for other energy goods. Natural gas prices fell by 0.4% in October, electricity costs eased by 0.2% and fuel oil costs fell by 1.1%.

Food prices advanced 0.6% in October after a flat reading in the prior month. Costs for fruits and vegetables increased sharply, but prices for some meats fell.

In other components, apparel prices inched up 0.1% last month, housing costs rose by 0.2%, and airline fares declined by 0.4%.

In the year ended in October, the CPI overall was up 1.5%. The performance has impressed many analysts, who have been struck by the fact that inflation has remained so low despite the economy’s rapid growth in recent years and the low unemployment rate of 4.6%.

Another report by the Labor Department showed that U.S. workers’ real average weekly earnings rose 0.4% in October, after adjusting for inflation and seasonal factors, following a 0.5% drop in September. Real average weekly earnings in October were up 2.1% from the same month a year earlier.

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Consumer Price Index:

Monthly percentage change, seasonally adjusted:

October: +0.2%

Source: Bureau of Labor Statistics