CPI Rises Modest 0.2% in October

Consumer prices rose 0.2% last month after an increase of twice that size in September as energy prices dipped slightly and clothing cost increases moderated, the Labor Department reported Wednesday.

Excluding often-volatile prices of food and energy, the “core” portion of the consumer price index also rose 0.2% in October after a 0.3% rise the month before.

In the first 10 months of this year, the core CPI has gone up at a 1.9% annual rate, compared with a 2.4% increase for all of 1998. The entire index is up at a 2.8% annual rate, with the difference due entirely to sharply rising oil prices. So far this year, gasoline and home heating oil prices have increased at a 30.9% pace, the department said.

“There is no sign of a pickup in inflation,” said economist Gerald D. Cohen of Merrill Lynch & Co. in New York after the report was released.

“All of the major components of the CPI showed small increases, with the exception of apparel prices, which rose 0.6% in October but are down 0.7% from a year ago.”

Many economists believe the Federal Reserve was justified in boosting interest rates by a quarter of a percentage point Tuesday as a hedge against future inflation despite Wednesday’s tame numbers.

Cohen said crude oil prices have gone up again since gasoline and home heating-oil prices were checked by the Labor Department last month, “portending further gains in the energy index.” He noted that airline fares jumped 5.3% last month, but added that fares are volatile, having fallen sharply in the two prior months.

Like the impact of energy prices on the overall CPI, tobacco product prices have had a major effect on the core portion of the index. Cigarette prices fell 0.3% last month, but they rose a steep 7.1% in September. In the last 12 months, tobacco prices have soared 31% and accounted for a quarter of the total increase in the core CPI.

Meanwhile, the Commerce Department said housing starts were virtually unchanged last month at an annual rate of 1.628 million units. That is just below the monthly average of 1.654 million units for the July-September period but well below the nearly 1.8-million-unit pace of the first three months of the year.

Rising mortgage interest rates have cooled housing sales and construction somewhat this year, but the sector remains healthy, analysts say. In some parts of the country, shortages of construction workers have held down housing starts.

Builders have reported some decline in the number of prospective buyers visiting their model homes, and applications for new mortgages for purchasing homes have fallen. The cumulative decline so far has not been great, but some analysts expect it to continue.

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Docile CPI

Monthly percentage change, seasonally adjusted:October: +0.2%