Bloomberg News

Consumer Prices in U.S. Probably Rose at Slower Pace in August

September 15, 2011

Sept. 15 (Bloomberg) -- The cost of living in the U.S. probably rose at a slower pace in August as energy prices fell, economists said before a report today.

The consumer-price index increased 0.2 percent after a 0.5 percent gain in July, according to the median forecast of 84 economists surveyed by Bloomberg News. The so-called core gauge, which excludes volatile food and fuel prices, may also have climbed 0.2 percent for a second month.

A drop in raw-material costs last month make it easier for companies like Lowe’s Cos. to hold the line on price increases as they compete for consumers coping with stagnating incomes and employment. Less inflation also gives Federal Reserve officials leeway to take additional measures if necessary to keep the economy from faltering.

“Weak demand conditions are likely to keep prices in check over the intermediate term,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. “Growth has clearly overtaken inflation as the primary economic risk.”

The Labor Department’s price data are due at 8:30 a.m. in Washington. Economists’ estimates ranged from declines of 0.2 percent to gains of 0.4 percent.

Other reports today may show manufacturing contracted in the New York and Philadelphia regions this month, industrial production was little changed nationwide in August. Figures from the Labor Department may show first-time jobless claims at a level that indicates limited improvement in the job market.

Bernanke on Inflation

The consumer price report may underscore Fed Chairman Ben S. Bernanke’s comments last week to the Economic Club of Minnesota that central bank officials expected inflation to slow as prices for oil and other commodities ease.

Crude oil prices have fallen 7 percent since the end of July on concerns about the global economic expansion. The cost of a gallon of regular gasoline at the pump averaged $3.62 in August, down from $3.65 a month earlier, according to data from AAA, the nation’s largest motoring group.

“We see little indication that the higher rate of inflation experienced so far this year has become ingrained in the economy,” Bernanke said. “Inflation is expected to moderate in the coming quarters,” he said, citing the waning of “transitory” influences like high fuel prices and global supply disruptions linked to Japan’s March earthquake and tsunami.

Recent data have shown the U.S. economy is stumbling. Retail sales were unchanged in August, the economy generated no jobs and earnings fell.

The projected increase in CPI would mean prices climbed 3.6 percent over the past year for a fourth straight month.

Lowe’s Cos.

Lowe’s, the second-largest home-improvement retailer, has been negotiating with vendors to minimize costs while passing some increases onto consumers.

“Our approach is to negotiate as hard as we can to the lowest cost possible,” Robert Gfeller, executive vice president for merchandising at Lowe’s, said in a teleconference Sept. 7. “Where we have taken (increased) pricing, we have moved some through to retail.”

Toyota Motor Corp. is among carmakers offering lower prices after inventories recovered following Japan’s earthquake. The Toyota City, Japan-based automaker is starting a blitz of U.S. model releases, some of them with cheaper price tags, to regain sales lost to rivals such as Hyundai Motor Co. after three years that included recession, recalls and the earthquake.

Toyota last month unveiled the 2012 Camry in Hollywood, California, with price reductions ranging from $200 to $2,000 on the top-end, four-cylinder Camry, Bob Carter, group vice president of U.S. sales, said in an interview.

Factory Figures

Fed figures at 9:15 a.m. are forecast to show industrial production was unchanged in August after a 0.9 percent gain in July, according to the Bloomberg survey median. A regional Fed report, released at 8:30 a.m., will show New York-area factories shrank in September for a fourth month, according to forecasts. Another regional Fed bank report, slated for 10 a.m., may show Philadelphia-region manufacturing contracted at a slower rate.

Jobless claims probably fell to 411,000 last week from 414,000 the prior week, economists forecast the Labor Department will report at 8:30 a.m.

The Fed’s preferred price gauge, which excludes food and fuel, rose 1.6 percent in July from a year earlier after climbing 0.9 percent in 2010. Fed policy makers aim for long-run overall inflation of 1.7 percent to 2 percent, according to their June forecast.

The CPI is the broadest of three monthly price measures from the Labor Department because it includes goods and services. About 60 percent of the CPI covers prices consumers pay for services ranging from medical visits to airline fares and movie tickets.

A Labor Department report yesterday showed the producer- price index in August were unchanged, while the cost of goods excluding fuel and food rose 0.2 percent. Import prices in the U.S., reported Sept. 13, dropped 0.4 percent from the prior month as oil and food expenses retreated.

--With assistance from Chris Middleton in Washington. Editors: Vince Golle, Carlos Torres

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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