Inflation at lowest level since 1957

chart_cpi_historical.top.gif By Annalyn Censky, staff reporter


NEW YORK (CNNMoney.com) -- Consumer prices for everything other than food and energy are rising, but at a rate so sluggish, it's the smallest price increase on record, the government said Wednesday.

The Consumer Price Index, a key measure of inflation, increased 1.2% over the past 12 months ending in October, the Bureau of Labor Statistics said.

But after stripping out volatile food and energy prices, the more closely watched core CPI rose 0.6% on an annual basis -- the smallest price increase since the government started recording the data in 1957.

Falling prices for new and used vehicles, apparel, recreation and tobacco kept the index low.

Still, it may feel to consumers like prices are rising: Shelter and medical care costs rose, and gasoline prices are up 9.5% over last year.

Consumers may also be noticing their grocery bills going up, but only slightly -- around 1.4% over last year.

The overall index remained low, even as commodity prices have surged in the last month -- some even to record highs. Cotton, for example, recently traded at its highest price in 140 years of trading.

Businesses just haven't started passing those costs on to consumers yet, said Jennifer Lee, senior economist with BMO Capital Markets.

"Businesses and producers are swallowing the increases we see in commodities," Lee said. "Consumers still have a lot of power in their hands."

A rate of inflation around 1% is considered sluggish, and raises concerns of deflation -- or falling prices.

While that may sound good to consumers who are still grappling with 9.6% unemployment, falling prices often also mean falling wages, as businesses respond to declines by cutting output and jobs.

That's why the Federal Reserve is trying to raise inflation slowly, around its target of about 2% per year. Two weeks ago, the central bank announced a plan to stimulate the economy by lowering interest rates -- a move that it hopes will encourage both consumers and businesses to spend more.

While that plan -- known as quantitative easing -- has recently come under fire from several economists, Wednesday's latest inflation data is likely to lend more support to the Fed's argument that the economy is teetering on the brink of deflation, and needs a jumpstart.

Defending the Fed's move in a speech Wednesday, Eric Rosengren, president of the Federal Reserve Bank of Boston cited low inflation as cause for concern.

"With unemployment so high and inflation unusually low, most models indicate that further monetary accommodation is warranted," he said.

Month by month: CPI rose 0.2% in October, on a monthly basis. Economists surveyed by Briefing.com had expected a 0.3% uptick. The increase was largely due to an increase in energy prices, the report said.

Meanwhile, core CPI was flat on a monthly basis, slightly lower than economists' forecasts for a 0.1% increase. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 16,399.67 19.26 0.12%
Nasdaq 4,316.07 57.63 1.35%
S&P 500 1,904.01 17.25 0.91%
Treasuries 2.18 -0.02 -0.82%
Data as of 7:25pm ET
Company Price Change % Change
Apple Inc 99.76 2.09 2.14%
Bank of America Corp... 16.26 0.05 0.31%
Pfizer Inc 27.93 0.10 0.36%
Facebook Inc 76.95 1.00 1.32%
Microsoft Corp 44.08 0.45 1.03%
Data as of 4:04pm ET

Sections

Better-than-expected iPhone sales and record Mac sales lifted Apple in its fiscal fourth quarter. More

Big projects often divide cities. But Minneapolis' light rail line is creating jobs and driving development in underserved areas. More

In three years, all Chicago high school students will have to take a coding course in order to graduate. More

Host a furniture market. Here's how small town High Point, N.C. rakes in this much money -- twice a year. More

Detroit has 80,000 dilapidated properties and 100,000 empty lots. It's trying to get more people like Antjuan Wyatt to buy them. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.