By Harriet Torry
WASHINGTON -- U.S. consumer prices rose only slightly in September, a sign inflationary pressures remain in check despite a solid economic growth and low unemployment rate.
The consumer-price index, which measures what Americans pay for everything from hair spray to hotel room service, rose 0.1% in September after rising a seasonally adjusted 0.2% in August, the Labor Department said Thursday. That undershot economists' expectations of a 0.2% rise.
Jim O'Sullivan, an economist at High Frequency Economics Ltd., said weak inflation momentum in the last two months "will keep the debate alive over whether the trend is up."
In the 12 months through September, overall prices rose 2.3%, the smallest year-over-year change since February. Core prices were up 2.2% on the year, the same rate as in August.
In a positive sign for American workers, modest prices increases caused the pace of inflation-adjusted earnings to rise at the strongest rate in six months. Average hourly earnings rose a seasonally adjusted 0.3% in September and are up 0.5% from September 2017.
Costco Wholesale Corp. boosted entry-level hourly pay by $1 to $14 earlier this year "and I believe that you'll see more pressure on it," Chief Financial Officer Richard Galanti said last week after the retailer posted strong sales growth in its most recent quarter.
Thursday's report showed an index of energy prices fell 0.5% in September, and gasoline costs dropped a seasonally adjusted 0.2% after rising 3% in August. The price index for used cars and trucks also declined considerably on the month, falling 3%. Food prices were flat.
Meanwhile, a stronger dollar is likely keeping a lid on the prices of goods, many of which are either purchased overseas or compete with imports. Rising interest rates and faster economic growth in the U.S. compared with other developed economies have helped push the dollar higher in recent months. The WSJ Dollar Index, which measures the greenback against a basket of other currencies, rose about 5% from June to September.
Thursday's reading comes roughly two weeks after Federal Reserve policy makers raised their benchmark short-term interest rate to a range between 2% and 2.25%. Officials signaled they expected to lift the rate again later this year and through 2019 to keep a strong economy on an even keel.
"The dual situation of relatively low inflation and a strong economy should help calm the fears of Fed officials and others who think the Fed needs to be aggressive in increasing interest rates," Navy Federal Credit Union economist Robert Frick said in a note to clients, adding "the data says price and wage growth are not in danger of overheating the economy."
The risk that inflation climbs higher and faster than anticipated could require the Fed to raise rates "a little bit quicker," Fed Chairman Jerome Powell said at his Sept. 26 press conference. He added, "We don't see that. We really don't see that."
"Inflation is low and stable," he said.
Thursday's report follows the Labor Department's latest employment report, which showed average hourly earnings for private-sector workers rose 2.8% in September from a year earlier, a slight pullback from the 2.9% annual pace of wage growth in August -- but still well above the 2.3% pace of year-over-year inflation.
On Wednesday, a gauge of U.S. business prices showed signs of bouncing back in September after a slowdown over the summer.
The producer-price index, a measure of the prices businesses receive for their goods and services, increased a seasonally adjusted 0.2% in September from a month earlier, the Labor Department said. The rise in September prices came after two months of sluggishness and was propelled by a hefty increase in transportation prices.
Theo Francis contributed to this article.
Write to Harriet Torry at firstname.lastname@example.org
(END) Dow Jones Newswires
October 11, 2018 10:30 ET (14:30 GMT)
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