Prices paid by consumers fell sharply in September, helped by a dramatic drop in energy costs, but the manufacturing community can’t yet rule out more interest rate hikes from the Federal Reserve.
The Labor Department reported Wednesday that the CPI dropped by 0.5 percent in September, a welcome retreat and the biggest decline since November of last year. The “core” rate of inflation, which excludes the often volatile food and energy segments, declined by 0.2 percent for the third consecutive month.
However, for the past 12 months core prices have increased at a 2.9 percent clip, the sharpest increase in more than 10 years, and a pace that will no doubt leave the Fed concerned about the underlying rate of inflation in the economy.
The government said energy prices plunged 7.2 percent in September, while food prices edged up 0.3 percent. Within the energy sector, petroleum based prices fell 12.9 percent, while the index for energy services rose by 1.2 percent.
Overall prices for transportation fell 4.1 percent, reflecting the drop in gas prices as well as a pullback in the cost of new and used cars and trucks, and airline fares.
Separately, the Commerce Department said Wednesday that housing starts unexpectedly jumped by 5.9 percent in September, even as economists were anticipating a decline. Building permits, on the other hand, dropped by 6.3 percent, continuing their run of weakness. The ongoing erosion in building permits likely points to a slowdown in home construction in the future.