Consumer prices plunged last month at the steepest rate in 56 years because of a sharp decline in oil and gasoline prices, the government...
WASHINGTON — Consumer prices plunged last month at the steepest rate in 56 years because of a sharp decline in oil and gasoline prices, the government reported Thursday, adding to other signs that the national economy has largely rebounded from the effects of the recent hurricanes.
The consumer price index, a widely followed measure of inflation, fell 0.6 percent in November — the largest drop since July 1949 — primarily because of an 8 percent drop in energy costs, the Labor Department said.
The CPI decline came just two months after a surge of 1.2 percent in September put the closely watched inflation gauge up 4.7 percent for the year ending Sept. 30 — the biggest spike over 12 months since May 1991. Because automatic cost-of-living adjustments are based on the CPI’s September reading, all 2006 cost-of-living adjustments were set at 4.1 percent for millions of Americans receiving Social Security and other federal benefits. That was the largest amount in 15 years.
Most Read Stories
- Man shot at UW no racist, friends insist, despite shooter’s claim
- We need real solutions to vehicle campers | Editorial
- Crowd comparison: Inauguration Friday and women's march Saturday
- Record Seattle crowd asserts women’s rights: 'Trump has galvanized everybody' WATCH
- Will Seahawks keep Luke Willson? That's among questions facing tight end position in offseason
Energy prices had soared after hurricanes Katrina and Rita disrupted oil production and refining in the Gulf of Mexico. Prices have eased since then as drilling rigs, refineries and pipelines have been gradually repaired.
However, consumers paid higher prices last month for many other items, including housing, clothing, medical care, hotel rooms, food, electricity and natural gas. Those price increases helped push the so-called core-CPI, which excludes energy and food costs, up 0.2 percent last month. Some of those price increases probably reflect efforts by hotel managers, landlords, retailers and others to pass on their higher energy costs, analysts said.
“High petroleum prices continue to pass through to the general price level,” said Eugenio Aleman, senior economist at Wells Fargo Economics. “There is potential for prices to continue to increase in the future.”
Even though energy prices fell last month, they had been rising steadily for more than a year before the hurricanes, and were 18.3 percent higher last month than they were in November of last year, the department reported.
The average price of regular gasoline, for example, was $2.19 a gallon Thursday, according to the AAA auto club. That’s way down from the peak price of $3.06 a gallon on Labor Day, but is still up from $1.83 a year ago.
The CPI rose 3.5 percent over the 12 months that ended in November, the Labor Department said.
“The overall cost of living has risen quite significantly over the year,” said Bernard Baumohl, executive director of The Economic Outlook Group, an economic consulting firm.
Most workers’ wages rose faster than inflation last month, but have fallen over the last year after adjusting for price changes, the Labor Department stated in another report. Average weekly earnings for most workers rose 0.6 percent in November from the month before, after adjusting for inflation, the department said.
But those wages, earned by private production and nonsupervisory service workers, bought 0.4 percent less last month than a year earlier, after adjusting for inflation.
“Once again, consumers are losing ground to inflation,” Baumohl said.
Average weekly wages were slightly lower last month, after adjusting for inflation, than they were four years earlier, in November 2001, when the last recession ended, noted Jared Bernstein, senior economist at the Economic Policy Institute, a think tank that focuses on labor issues.
The CPI report is likely to reinforce the Federal Reserve’s view that high energy prices and strong economic growth may add to inflation pressures in coming months. Fed officials indicated they are likely to lift interest rates again next month to keep inflation under control.
Businesses also used more of their production capacity, pushing the usage rate to 80.2 percent, the Fed reported. Some economists believe a rate of 80 or above can result in bottlenecks that push prices up.
“Higher levels of utilization, as noted in the most recent [Fed] statement, will tend to put a little more upward pressure on inflation in the months ahead,” economists at Goldman Sachs U.S. Economics Research wrote in an analysis for clients.