The cost of living fell more than forecast in November as energy prices dropped, a sign inflation in the economy remains under control.
The 0.3 percent decrease in the consumer price index was the first drop since May and followed a 0.1 percent gain the prior month, the Labor Department reported Friday in Washington. The median estimate of 80 economists surveyed by Bloomberg News called for a 0.2 percent drop. The core index, which excludes volatile food and energy costs, climbed less than projected.
Facing little threat of inflation, Federal Reserve policy makers this week expanded asset purchases in a continuing bid to reduce unemployment and spur growth.
Department stores including Gap, Macy’s and J.C. Penney are offering sales in the midst of the holiday shopping season as concern over possible changes in tax rates and government spending hurts consumer confidence.
“Inflation remains tame,” said Gus Faucher, senior economist at PNC Bank in Pittsburgh, who correctly forecast the decline. “It’s difficult for firms to raise prices in the current environment. Labor costs are low, profit margins are good.
Fed policymakers linked interest rates to unemployment and inflation. Rates will remain low “at least as long” as unemployment remains above 6.5 percent and inflation is projected to be 2.5 percent or lower, the FOMC said Wednesday in a statement.
“Longer-term inflation expectations continue to be well anchored,” Federal Reserve Chairman Ben S. Bernanke said at a press conference Wednesday.
In the 12 months ended in November, consumer prices rose 1.8 percent, the report showed.
The core CPI reading increased 0.1 percent last month following a 0.2 percent gain in October. For the past 12 months, core prices were up 1.9 percent, compared with a 2 percent advance for the year through October.
The core measure was restrained by a 0.1 percent gain in medical care, that reflected a record drop in drug costs. In addition, clothing and used-car prices fell.
Falling energy costs, including cheaper gasoline, are keeping inflation down. Energy costs decreased 4.1 percent in November, the biggest drop since May. Gasoline plunged 7.4 percent, the largest decrease since December 2008.
Fuel costs continue to fall this month. A gallon of regular fuel at the pump dropped to $3.29 on Dec. 13 on average, the lowest since January and down from a peak of $3.87 on Sept. 13, according to AAA, the biggest U.S. auto group.
Hourly wages adjusted for inflation increased 0.5 percent on average in November. It was the biggest gain since December 2008, after a 0.2 percent decrease the prior month, a separate Labor Department report showed. Over the past 12 months, real hourly pay was little changed.
The CPI is the broadest of 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.
Wholesale prices in the U.S. fell more than forecast in November, the Labor Department reported Thursday. The decline reflected the biggest drop in the cost of energy since March 2009.
Import prices also dropped in November, the first decline in four months, on cheaper crude oil and business equipment.