Consumer prices continue to flatline

November 20, 2014

WASHINGTON (11/21/14)--Consumer prices continue to make little progress in pushing inflation up toward the Federal Reserve's target number of 2%, as the consumer price index (CPI) remained unchanged in October, keeping headline inflation at 1.7% above its year-ago levels, the Bureau of Labor Statistics reported Thursday ( Nov. 20).

While core prices, which climbed 0.2% for the month, came in stronger than analysts had anticipated, falling energy prices, including the price of oil, continue to hinder gains in price growth, Moody's said.

The gasoline index dropped for a fourth consecutive month, falling 3% in October and 8% total over the last three months. Natural gas and fuel prices also have slipped of late, pushing the overall energy index down 1.9%.

"The large decline in energy components was no surprise," said James Bohnaker, Moody's analyst ( Nov. 20). "Oil prices plummeted early in the month and have not rebounded. Brent and West Texas Intermediate crude oil are both trading at less than $80 per barrel, down from $100 in mid-summer."

Food, meanwhile, recorded only a 0.1% jump in prices, its smallest increase since June, as meat prices dropped 0.4%.

The gains in the core CPI were driven by rent prices and other service costs, according to Moody's. The shelter index (rent) advanced 0.2%, and has climbed 3% since this time last year. Other household-related prices, including household furnishings and lodging, also posted increases.

"Rental costs will grow strongly over the next year as household formation picks up, particularly among younger cohorts in large urban areas," Bohnaker said. "The homeownership rate has shown no sign of coming back, so most pent-up demand for housing will be funneled into the multifamily segment in the near term."