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Consumer prices fall in October

Lower costs for gasoline, fruits and vegetables help drop the consumer price index 0.1%, the Labor Department reports.

November 17, 2011|By Jeffry Bartash

WASHINGTON — Americans got some relief in October as the cost of living fell, mainly because of lower prices for gasoline, fruits and vegetables, the government reported.

The Labor Department said Wednesday that the consumer price index dropped a seasonally adjusted 0.1% last month. The decline reduced the 12-month increase in consumer prices to 3.5% from 3.9% in September.

The core rate of inflation, meanwhile, rose 0.1% for the second straight month, but it marked the lowest back-to-back increases of 2011. The core rate has risen 2.1% in the last 12 months, up from 2.0% in September.

The core rate strips out the volatile food and energy categories and is used by the Federal Reserve to help guide its decision on raising or lowering interest rates. The central bank usually tries to aim for 2% annual inflation or less.

Economists surveyed by MarketWatch had expected the CPI, which tracks inflation at the retail level, to be unchanged. The core rate was expected to edge up 0.1%.

Energy prices fell 2.0% last month, while food prices inched up 0.1%.

The decline in consumer prices, combined with a small rise in wages last month, boosted the average hourly earnings of U.S. workers 0.3%, adjusted for inflation.

The increase in real wages has given consumers a little more cash to spend on things other than basic necessities such as fuel and food and probably contributed to higher retail sales in October.

The lower cost of living last month was tied mostly to a 3.1% decrease in gasoline prices. That reversed a 2.9% increase in September.

Still, gasoline costs are up 23.5% compared with a year earlier.

Although food prices rose slightly, the increase was the smallest in 10 months. The slower rate stemmed from a sharp decline in the cost of fruits and vegetables, which fell 1.7% in October to mark the biggest one-month drop in nearly five years.

Bartash writes for MarketWatch.com/McClatchy.

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