Consumer costs flat in September
Consumer prices were flat in September as retreating costs for gasoline, clothes and new cars helped to offset rising prices for food, medical care and other things.
The new reading on the consumer price index, the government’s most closely watched inflation barometer, came after prices actually fell 0.1% in August, the Labor Department reported Thursday.
Those two months offered Americans a rare reprieve. Consumer prices have marched upward most of the year, surging 1.1% in June.
And that means paychecks aren’t stretching as far, straining consumers. Recent readings on retail sales were grim. If consumers retrench further, that would spell more trouble for the already ailing economy.
Other economic reports showed that filings for unemployment benefits remained elevated and that big industry production plunged by the most since late 1974, largely reflecting fallout from hurricanes Gustav and Ike.
In the inflation report, when energy and food are stripped out, “core” prices inched up 0.1% in September, down from a 0.2% advance in August.
The latest showing on inflation was better than economists expected. They were forecasting a 0.1% increase in overall prices and a 0.2% rise minus energy and food.
Paychecks continued to shrink.
Weekly wages dropped by 2.5% in September compared with a year earlier, the 12th straight period in which wages have been down.
This year, consumer prices have risen at an annualized pace of 4.5%, faster than the 4.1% increase for all of 2007. Core prices in the first nine months of this year have increased at a pace of 2.4%, matching the rise for all of last year.
Another Labor Department report showed that the number of new people signing up for unemployment benefits dropped last week. Even with the decline, new claims totaled 461,000 -- a figure indicating deep troubles in employment conditions. The four-week moving average of jobless claims is at a seven-year high. The number of people continuing to collect jobless benefits rose to 3.7 million, the highest since late June 2003, when the labor market was still struggling to get back on its feet after the 2001 recession.
A report from the Federal Reserve said production at U.S. factories, mines and utilities plunged 2.8% last month after a 1% drop in August.
The Fed estimated that disruptions related to the hurricanes accounted for about 2.25 percentage points of the total drop in industrial production in September.