US Oct CPI misses forecasts to remain flat

New York

A MEASURE of prices paid by US consumers was unchanged in October, missing forecasts that called for a modest gain and indicating scant inflation as the pandemic drags on.

The reading on the consumer price index (CPI) was the tamest in five months and followed a 0.2 per cent advance in September, US Labor Department data showed on Thursday. Compared with a year earlier, the gauge rose 1.2 per cent. The core index, which excludes volatile food and energy costs, was also unchanged from the prior month and up 1.6 per cent from a year earlier.

The median estimate in a Bloomberg survey of economists called for a 0.1 per cent monthly increase in CPI and a 0.2 per cent gain in the core gauge. The report showed components were mixed as higher airfares and new-car prices helped offset declines in costs of petrol, medical care and clothing. Food inflation picked up by the most since June as grocery costs stabilised and consumers continued to dine out.

The data signal inflation remains subdued as the pandemic continues to weigh on demand in some parts of the economy. While inflation stabilised as the US economy picked up in the third quarter, risks of a broad acceleration are low given weakness in services activity.

The pandemic has had a significant impact on a range of goods and services costs, including food prices and airfares. Inflation has been persistently running below the Federal Reserve's 2 per cent goal, measured by the Commerce Department's personal consumption expenditures price index (PCE). PCE tends to be a little bit weaker than CPI on average.

The Fed has signalled it plans to keep interest rates near zero through 2023, but there are few signs the policy will push inflation above their goal on a sustained basis. The latest survey of consumer expectations from the New York Fed showed inflation expectations over the next year and next three years both eased from the prior month.

Another set of data from the Labor Department showed US state unemployment benefits fell by the most in five weeks, signalling the gradual recovery in the labour market is continuing despite a record surge in Covid-19 infections.

Initial jobless claims in regular state programmes totalled 709,000 in the week ended Nov 7, down 48,000 from the prior week, data showed on Thursday. On an unadjusted basis, the figure decreased by about 21,000.

Continuing claims - the total number of Americans claiming state unemployment assistance - fell by 436,000 to 6.79 million in the week ended Oct 31. But the number of people claiming support in programmes offering extended assistance continued to increase as more Americans exhausted their regular state benefits.

The main figures were below economists' projections for 731,000 initial claims and 6.83 million continuing claims, according to the median estimates in Bloomberg surveys.

While initial claims remain more than triple pre-pandemic levels, the data suggest the labour-market rebound is holding up after a stronger-than-forecast jobs report for October. BLOOMBERG