Consumer Price Growth Eases

Inflation at the consumer level, helped by a retreat in gasoline prices, slowed last month after racing ahead at the fastest clip in a quarter-century in September. But in a bad sign for the upcoming home heating season, natural gas prices rose sharply.

The Labor Department reported Wednesday that consumer prices rose 0.2% in October after soaring 1.2% in September, when the Gulf Coast hurricanes caused gasoline prices to spike briefly above $3 a gallon.

The easing of overall inflation pressures reflected a 0.2% decline in energy costs after a record 12% jump in September. Most of that downward pressure came from a 4.5% drop in gasoline prices.

However, natural gas, which is used to heat many homes, went the other way in October. It surged 14%, the biggest monthly increase in nearly four years.

The government already is forecasting that natural gas users can expect to see their bills increase by 48% this winter heating season, or $350 extra for the typical household. People who use home heating oil will see a 32% increase, which also averages to $350 more.

Core inflation, which does not include the volatile food and energy areas, rose 0.2% in October after five straight months of 0.1% increases.

Although the acceleration was slight, some analysts worried that it might be the start of more widespread inflationary pressures.

“There is beginning to be evidence that high energy prices are starting to spill over into the rest of the economy,” said Nariman Behravesh, chief economist at Global Insight, a Lexington, Mass., economics consulting firm.

Analysts noted that airline fares were up 1.5% in October, while hotel and motel rates jumped 3.5% and medical care costs rose 0.5%, the fastest pace in seven months.

“Make no mistake about it. Inflation is building in the pipeline,” said Richard Yamarone, chief economist at Argus Research in New York. “It is no longer a matter of if, but when, those price pressures will start to affect the general price level.”

Analysts worried about inflation predicted that rising prices would make further interest rate hikes the first order of business for Ben S. Bernanke, whose nomination to succeed Federal Reserve Chairman Alan Greenspan won approval from the Senate Banking Committee on Wednesday.

The federal funds rate, a key short-term interest rate, is now at 4%. Analysts said they believed that the Fed under Greenspan would boost it twice more at its December and January meetings and that Bernanke, who is scheduled to take over Feb. 1, will keep raising the funds rate through the first half of next year, pushing it perhaps as high as 5.5%.

This year, overall consumer prices have been rising at an annual rate of 4.9% as energy prices have shot up at a 37.1% rate. Last year, overall prices were up 3.3%.

In other economic news, the Commerce Department reported that business inventories rose by 0.5% in September, the largest increase in eight months, reflecting in part rising levels of unsold autos.