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Consumer Prices in U.S. Increased at a Slower Pace in October

Nov. 15 (Bloomberg) -- The cost of living rose in October at the slowest pace in three months, a sign U.S. inflation is in check.

The 0.1 percent increase in the consumer-price index followed a 0.6 percent gain the prior month, the Labor Department reported today in Washington. The median estimate of 83 economists surveyed by Bloomberg called for a 0.1 percent rise. The so-called core measure, which excludes more volatile food and energy costs, climbed 0.2 percent, more than projected, reflected rising rents and clothing costs.

Macy’s Inc. is among retailers planning holiday discounts, while Amazon.com Inc. and Wal-Mart Stores Inc. are battling to offer the best online prices on toys, indicating companies have little leeway to charge more. The inflation outlook is in sync with the Federal Reserve’s view and gives policy makers room to concentrate on boosting growth.

“We’re not seeing much by way of inflationary pressures,” Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, said before the report. “It gives the Fed a lot more flexibility to maneuver here. The Fed is going to keep the pedal pressed all the way to the floor to try to boost growth.”

Bloomberg survey estimates for the consumer-price index ranged from a drop of 0.1 percent to an increase of 0.3 percent.

In the 12 months ended in October, consumer prices rose 2.2 percent, the report showed.

Core Prices

The core CPI reading showed the biggest increase since June and compared with a 0.1 percent median forecast of economists surveyed. Core prices were up 2 percent for the year through October, the same as in the 12 months through September.

A separate report from the Labor department showed more Americans than forecast submitted claims for unemployment insurance last week as superstorm Sandy wreaked havoc on the job market.

Applications for jobless benefits surged by 78,000 to 439,000 in the week ended Nov. 10, the most since April 2011. Several states said the increase was due to the storm that hit the Northeastern part of the country in late October, a Labor Department spokesman said as the data were released to the press.

The CPI report showed energy costs fell 0.2 percent in October from a month earlier. A gallon of regular fuel at the pump has averaged $3.46 so far in November, down 41 cents from a recent high of $3.87 on Sept. 13, according to AAA, the biggest U.S. auto group.

Hourly Wages

Restrained fuel costs may help Americans’ recover some of the buying power they’ve lost this year as salaries stagnated. Hourly wages adjusted for inflation decreased 0.2 percent on average in October after a 0.3 percent drop the prior month, a separate Labor Department report today showed. Over the past 12 months, real hourly pay was down 0.7 percent.

The consumer-price report showed food costs advanced 0.2 percent.

The core measure was propelled by a 0.4 percent increase in the index for rents, the biggest gain since June 2008. A measure designed to track the rental value of owner-occupied houses rose 0.2 percent. Clothing costs increased 0.7 percent, hotel fares climbed 0.5 percent, and airline fares climbed 2.4 percent.

In contrast, medical care expenses were little changed, the first time since July 2010 they didn’t increase. The index for used cars and trucks dropped 0.9 percent, the fourth consecutive decrease.

Retailer Discounts

Macy’s, the second-largest U.S. department-store chain, posted third-quarter profit that topped analysts’ estimates while its forecast for the end of the year signaled it may use heavy discounts to draw holiday shoppers.

Amazon.com has cheaper online prices for toys than Wal- Mart, Target Corp. and other major chains as parents begin shopping for the holidays, according to a Bloomberg Industries analysis. In a comparison of 125 randomly selected toys conducted Nov. 8, Amazon had lower prices than Wal-Mart on 44 percent of the items, while Wal-Mart had the advantage on 13 percent.

Wal-Mart, the world’s largest retailer, today forecast profit this year that trailed some analysts’ estimates after difficult economic conditions slowed sales gains at established U.S. stores in the third quarter.

“Current macroeconomic conditions continue to pressure our customers,” Chief Financial Officer Charles Holley said in a statement. “The holiday season is predicted to be very competitive.”

Fed Outlook

Limited price pressures give policy makers room to maintain a third round of unprecedented bond-buying aimed at spurring the expansion and reducing unemployment. Longer-term inflation expectations have “remained stable,” the Federal Open Market Committee said in an Oct. 24 statement after its meeting.

“The Committee also anticipates that inflation over the medium term likely would run at or below its 2 percent objective,” the Fed officials said.

Minutes of their last meeting, released yesterday, showed a number of officials said the central bank may need to expand its monthly purchases of bonds next year after the expiration of Operation Twist.

The minutes also showed policy makers had a detailed discussion about whether the central bank should link its policy of holding the main interest rate at zero to numerical measurements of unemployment and inflation , an approach that participants “generally favored” over the current approach of specifying a calendar date through which rates will remain low.

Inflation Measures

The CPI is the broadest of the three monthly price measures from the Labor Department because it includes goods and services. About 60 percent of the CPI covers prices consumers pay for services ranging from medical visits to airline fares and movie tickets.

Producer prices, released yesterday, unexpectedly fell in October for the first time in five months as energy and vehicle costs dropped. The 0.2 percent decline followed a 1.1 percent increase the prior month.

Import prices unexpectedly climbed in October, led by increases in energy expenses that have since been reversed. The 0.5 percent advance followed a 1.1 percent gain in September and a 1.2 percent rise in August, figures showed last week.

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