US CPI subdued, housing slumps to lowest level

The data on Wednesday could help to ease criticism of the Fed’s unpopular November 3 decision to inject more money into the economy through purchases of $600 billion worth of government debt. The Labour Department said its Consumer Price Index rose 0.2 per cent last month after edging up 0.1 per cent in September and below economists’ expectations for a 0.3 per cent gain.

Excluding volatile food and energy prices, core CPI was flat for a third straight month in October and the increase from a year ago of 0.6 per cent was the smallest since records started in 1957, the department said. Economists polled by Reuters had expected core CPI to edge up 0.1 per cent in October and the year-on-year rate to rise 0.7 per cent after a 0.8 per cent increase in September. In a separate report, the Commerce Department said housing starts plummeted 11.7 per cent to a 519,000 annual rate from a downwardly revised 588,000 in September.

It was the weakest starts rate since 477,000 in April 2009 when the economy was still struggling with the impact of the 2007-2008 financial crisis.

Permit applications for new building edged up to 550,000 last month from an upwardly revised 547,000 in September, potentially a sign that builders hope for better times ahead. The inflation data came on the heels of a report on Tuesday that showed core producer prices recorded their biggest decline in more than four years in October as vehicle prices tumbled. The US central bank’s unpopular decision was driven by policymakers’ desire to prevent the current disinflation environment from translating into a crippling phase of deflation and to boost a sluggish labor market.

However, discount chain Target Corp offered an upbeat fourth-quarter sales forecast on Wednesday, while earlier this week top retailer Wal-Mart Stores said holiday sales would break a six-quarter streak of same-store sales declines in the United States.

In October, overall consumer prices were lifted by a 4.6 per cent jump in gasoline prices after increasing 1.6 per cent the prior month. Food prices rose by a muted 0.1 per cent after gaining 0.3 per cent in September.

New motor vehicle prices, which depressed core wholesale prices in October, contributed to holding down the core CPI number. New vehicle prices fell 0.2 per cent, while the cost of used trucks dropped 0.9 per cent. Shelter costs edged up 0.1 per cent, while apparel fell 0.3 per cent in October. —