US consumer inflation in surprise slowdown (AFP)

WASHINGTON (AFP) – US consumer prices rose a mere 0.1 percent in November in a surprise easing of inflation amid a weak economic recovery, official data showed Wednesday.

Economists had expected the Labor Department’s consumer price index to match October’s gain of 0.2 percent.

The weak inflation number supported the Federal Reserve’s decision to pump an extra 600 billion dollars into the markets to support the flagging recovery.

“We expect the slight downward trend to continue in the coming months as domestic disinflationary pressures coming from the labor market persist while the energy-related base effects should add to the slowdown of the headline” CPI, said Inna Mufteeva at Natixis.

The sharper-than-expected moderation in inflation was due in part to a slowdown in rising energy prices, which increased only 0.2 percent in November, the weakest rise since June, after surging 2.6 percent in October.

On an annual basis, overall CPI was up 1.1 percent from November 2009.

Excluding food and energy prices, which can be volatile month-to-month, so-called “core” CPI increased 0.1 percent, as expected, after three months of flat readings.

Core inflation, however, increased on an annual basis to 0.8 percent after falling in October to a record 0.6 percent rise, the weakest gain in records dating to 1957.

The Labor Department numbers confirmed that inflation remained far below the Federal Reserve’s outlook for longer-term price stability.

The Fed on Tuesday stuck to its plan to spend another 600 billion dollars in quantitative easing and held interest rates near zero for a second year in hopes of reducing high unemployment and supporting prices.

The Fed is worried that the current environment of extremely low inflation amid a weak recovery could lead to deflation, a dangerous downward spiral of prices and wages that is difficult to exit.

“Despite the generally more optimistic outlook for the growth in our scenario the fears of deflation still dominate the inflationary ones in the short and medium term as the resource slack remains significant,” Mufteeva said.

The wage numbers released separately by the Labor Department showed real average hourly earnings fell 0.1 percent from October to November due to the 0.1 percent increase in the CPI.

With the number of hours worked unchanged, real average weekly earnings fell 0.1 percent over the month.

“Over the past six months, real average weekly earnings has changed little,” the department said.

This news, US consumer inflation in surprise slowdown
quoted from US Economy

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