Consumer prices hold the line
Cheaper clothing, gas offset costlier food in September
WASHINGTON - Consumer prices were flat in September as retreating costs for gasoline, clothes, and new cars helped to offset rising prices for food, medical care, and other things.
The latest reading on the Consumer Price Index, the government's most closely watched inflation barometer, came after prices actually slid 0.1 percent in August, the Labor Department reported yesterday.
Those two months, however, offered Americans a rare reprieve. Consumer prices have marched upward most of the year, spiking 1.1 percent in June.
And that means paychecks aren't stretching as far, straining consumers. Recent readings on retail sales were grim. The prospects that consumers will retrench further would spell more trouble for the already ailing economy.
Other economic reports showed filings for unemployment benefits remained elevated and big industry production plunged by the most since late 1974, largely reflecting fallout from hurricanes Gustav and Ike.
In the inflation report, when energy and food products are stripped out, "core" prices rose just 0.1 percent in September, an improvement from a 0.2 percent advance in August.
The latest showing on inflation was better than economists expected. They were forecasting a 0.1 percent increase in overall prices and a 0.2 percent rise minus energy and food.
Weekly wages dropped 2.5 percent in September compared to a year ago, the 12th straight period in which wages have been down.
So far this year, consumer prices have risen at an annualized pace of 4.5 percent, faster than the 4.1 percent increase for all of 2007.
Core prices in the first nine months of this year have increased at a pace of 2.4 percent, matching the rise for all of last year.
Another Labor Department report showed the number of new people signing up for unemployment benefits last week dropped. Even with the decline, new claims totaled 461,000 - a figure associated with deep troubles in employment conditions.
Indeed, the four-week moving average of jobless claims is at a seven-year high. And, the number of people continuing to collect jobless benefits rose to 3.7 million, the highest since late June 2003, when the labor market was still struggling to get back on its feet after the 2001 recession.
Vanishing jobs, dwindling nest eggs, and shrinking paychecks are straining millions of ordinary Americans. Economic anxiety is the voters overarching concern as they get ready to head to the polls in a few weeks to select the next president.
Whether that's Barack Obama or John McCain, the next leader will be confronted by a troubled economy.
A report from the Federal Reserve said that production at the nation's factories, mines, and utilities plunged 2.8 percent last month, on top of a 1 percent drop in August.
And, the Fed estimated that disruptions related to the hurricanes accounted for about 2.25 percentage points of the total drop in industrial production in September.
In an unprecedented assault on the financial crisis, the Fed and other major central banks together reduced rates last week.
The Fed's main rate dropped to 1.5 percent from 2 percent.