Prices in U.S. hold steady
U.S. consumer prices held steady in November, confounding expectations of a small rise, as energy and vehicle costs dropped, according to a government report Friday that eased inflation worries.
A separate report showed that output at U.S. factories, mines and utilities rose more than expected in November, pointing to resilience among producers.
Consumer prices were unchanged in November along with so-called core prices, which strip out volatile food and energy costs, the Labor Department said.
Economists polled by Reuters were expecting consumer prices and core prices both to rise by 0.2%.
Investors and analysts saw the consumer price report as evidence that the Federal Reserve could cut interest rates to help an unevenly growing economy return to full potential.
“All we wanted from this holiday season was a little more growth and a little less inflation, and Santa looks like he has delivered. This is just a great report,” said Mark Vitner, an economist at Wachovia Securities in Charlotte, N.C.
Consumer prices and core consumer prices were also lower than expected over 12 months. Consumer prices rose a less-than-expected 2% and core consumer prices rose 2.6% from November 2005.
Analysts polled by Reuters were expecting a 2.2% rise in consumer prices and a 2.7% gain in core prices from a year earlier.
The full-year core price gain was lower for the second month in a row after reaching a more than 10-year high of 2.9% in September. Fed Chairman Ben S. Bernanke said in late November that inflation was “uncomfortably high,” but he expected slower growth to ease some price pressures.
An index of personal consumption expenditures, a favorite inflation reading of the Fed’s, is due to be released Dec. 22.
Contributing to lower core prices for November, prices for new and used vehicles fell 0.8%, the Labor Department said. At the same time, housing prices rose 0.4% and the shelter component, which includes rents, was up 0.4%.
The effect of lower energy prices was also evident in real average weekly earnings of U.S. workers, which rose 0.2% in November. Inflation-adjusted weekly earnings were up for a third month in a row, after falling in five of eight months, the Labor Department said.
Industrial production rose 0.2% in November on gains in manufacturing, but that was after a revision showing that output had been weaker in October than originally reported. Industrial capacity use was unchanged last month, the Fed said.
Analysts saw the industrial production data as alleviating worries about the outlook for growth.
“There was no evidence of a broadening out of weakness beyond the construction sector,” said Pierre Ellis, a senior economist at Decision Economics in New York. “Concerns about worse problems with the economy than already perceived will dissipate.”
