Inflation edges up on car, energy prices

Consumer prices edged up faster than expected in October, driven higher by another increase in energy prices and the biggest jump in new car prices in 28 years.

Still, prices are lower than they were a year ago and inflation is expected to remain subdued amid a slow economic recovery.

The Labor Department said Wednesday that consumer prices rose 0.3% in October, a bit more than the 0.2% economists had expected. Core inflation, which excludes energy and food, rose 0.2%, more than the expected 0.1% rise.

Overall prices since October 2008 were down 0.2%, reflecting the effects of the longest recession since the 1930s. Even though economists believe the downturn ended this summer, the unemployment rate has continued to rise, hitting a 26-year high of 10.2% in October.

Weak labor markets have kept a lid on wage pressures, and the fragile economy has made it tough for businesses to raise prices.

Fed Chairman Ben Bernanke said this week that he expected inflation would remain “subdued for some time.” Many economists don’t believe the Fed will even consider beginning to raise interest rates until the unemployment rate peaks, probably next summer.

For October, energy prices rose 1.5%, the biggest increase since a 4.6% jump in August. A 6.3% rise in home heating oil and a 1.6% increase in gasoline prices drove the advance.

Crude prices have been hovering around $79 a barrel for more than a month, an increase from the lows around $32 hit last December but still below the record high above $147 hit in July 2008.

Food prices edged up 0.1% last month. A big jump in prices of dairy products was partially offset by a drop in the category that includes meats, poultry and fish.

A 1.6% surge in the cost of new autos drove the 0.2% rise in core inflation. The price of used cars and trucks was up 3.4%, the biggest rise since September 1980. Analysts said the jump in used-car prices in part reflected the government’s “cash for clunkers” program, which reduced the stockpile of used vehicles.

The advance in both new and used car prices accounted for 90% of the increase in core inflation last month, government analysts said.

Airline fares rose 1.7%, reflecting higher fuel costs, but clothing prices dropped 0.4% as the economy has made it difficult for stores to charge more.