Bloomberg News

Consumer Prices in U.S. Probably Rose on Fuel Costs

October 16, 2012

A Customer Sits With An Abercrombie & Fitch Co. Bag

Companies such as Abercrombie & Fitch Co. and Safeway Inc. are among those saying price increases are difficult to achieve as 12.1 million Americans remain unemployed and rising fuel bills eat into workers’ paychecks. Photographer: Chris Ratcliffe/Bloomberg

The cost of living in the U.S. probably rose in September for a second month as a jump in energy expenses overshadowed smaller gains in other goods and services, economists said before a report today.

The consumer-price index increased 0.5 percent last month after climbing 0.6 percent in August, according to the median forecast of 86 economists surveyed by Bloomberg. So-called core prices, which exclude volatile food and energy costs, may have risen 0.2 percent. Another report may show manufacturing is struggling to stabilize.

Companies such as Abercrombie & Fitch Co. (ANF:US) and Safeway Inc. (SWY:US) are among those saying price increases are difficult to achieve as 12.1 million Americans remain unemployed and rising fuel bills eat into workers’ paychecks. The lack of pricing power is one reason the Federal Reserve eased policy further to focus on jump-starting employment.

“This is purely an energy story,” said Omair Sharif, a U.S. economist at RBS Securities Inc. in Stamford, Connecticut. “For the core reading, inflation looks pretty tame. Consumers are seeing some relief in the growth rate of a lot of prices. The Fed is perfectly fine with where inflation is right now.”

The Labor Department will release the CPI data at 8:30 a.m. in Washington. Economists’ estimates ranged from gains of 0.1 percent to 0.7 percent.

Their median forecast would mean consumer prices advanced 1.9 percent in the past year. The core index is projected to increase 2 percent from September 2011.

Production Floundering

At 9:15 a.m. in Washington, Fed data is projected to show industrial production in September failed to recoup the ground lost the prior month. Output at factories, mines and utilities rose 0.2 percent following a 1.2 percent drop in August that was the largest since March 2009, according to the survey median.

Propping up the consumer price index, the cost of a gallon of regular gasoline averaged $3.83 in September compared with $3.70 in August, according to data from auto club AAA.

Even so, Fed policy makers said they aren’t worried the run-up in fuel costs will spark inflation. Federal Open Market Committee “members generally continued to anticipate that, with longer-term inflation expectations stable and given the existing slack in resource utilization, inflation over the medium term would run at or below the Committee’s longer-run objective of 2 percent,” according to the minutes of their Sept. 12-13 meeting.

Investors see inflation holding near the Fed’s goal. The difference in yields between 5-year notes and Treasury Inflation Protected Securities, or TIPS, which represents traders’ expectations for the rate of inflation over the life of the bonds, was 2.15 percentage points at 4:30 p.m. in New York on Oct. 15.

Fed Mandates

The central bankers’ inflation goal is part of their dual mandate for stable prices and maximum employment. Their preferred price measure, issued by the Commerce Department and tied to consumer spending, rose 1.5 percent in the 12 months ended in August.

Given the outlook for employment and inflation, the Fed said Sept. 13 it would buy $40 billion of mortgage bonds a month until the U.S. sees what Chairman Ben S. Bernanke described as an “ongoing, sustained improvement in the labor market.” The Fed said it will also probably hold its target lending rate near zero at least through mid-2015.

New Albany, Ohio-based Abercrombie & Fitch, the teen clothing retailer, said this month it may roll back price increases taken last year at its flagship stores when cotton costs soared.

Lowering Prices

“This year, we’re going to be lowering those prices back to where they were previously,” Brian Logan, controller and vice president for finance, said in an Oct. 2 consumer conference. “We weren’t as competitive with those items, so we thought it was more appropriate to bring that price back down.”

Safeway, the second-largest U.S. grocery store chain, has a similar view.

“There is a reluctance to raise prices” for packaged goods, said Steven Burd, the Pleasanton, California-based company’s chief executive officer said in an Oct. 11 earnings call. While rising expenses for some commodities like eggs and cheese can be passed through, “the packaged goods sector is behaving cautiously with respect to cost increases.”

A Labor Department report on Oct. 12 showed prices paid to producers climbed 1.1 percent in September on rising fuel costs. Import prices in the U.S., reported Oct. 11, also advanced 1.1 percent last month.

The CPI is the broadest of the 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.

                        Bloomberg Survey

================================================================
                               CPI     Core     Ind.     Cap.
                                        CPI    Prod.    Util.
                              MOM%     MOM%     MOM%        %
================================================================

Date of Release              10/16    10/16    10/16    10/16
Observation Period           Sept.    Sept.    Sept.    Sept.
----------------------------------------------------------------
Median                        0.5%     0.2%     0.2%    78.3%
Average                       0.5%     0.2%     0.2%    78.3%
High Forecast                 0.7%     0.4%     0.7%    79.0%
Low Forecast                  0.1%     0.0%    -1.0%    78.0%
Number of Participants          86       86       85       67
Previous                      0.6%     0.1%    -1.2%    78.2%
----------------------------------------------------------------
4CAST                         0.5%     0.2%     0.6%    78.5%
ABN Amro                      0.4%     0.2%     0.0%     ---
Action Economics              0.4%     0.1%     0.4%    78.4%
Ameriprise Financial          0.4%     0.1%     0.3%    78.4%
Banca Aletti                  0.6%     0.2%     0.1%    78.2%
Bank of the West              0.5%     0.2%     0.3%    78.3%
Banorte-IXE                   0.5%     0.2%     0.3%     ---
Bantleon Bank AG              0.4%     0.2%     0.1%     ---
Barclays                      0.6%     0.2%     0.1%    78.2%
Bayerische Landesbank         0.6%     0.2%    -0.1%     ---
BBVA                          0.4%     0.2%     0.4%    78.5%
BMO Capital Markets           0.4%     0.2%     0.3%    78.3%
BNP Paribas                   0.6%     0.2%     0.0%    78.2%
BofA Merrill Lynch            0.5%     0.2%     0.3%    78.3%
Briefing.com                  0.5%     0.1%     0.0%    78.2%
Capital Economics             0.5%     0.1%    -0.3%    78.0%
CIBC World Markets            0.6%     0.2%     0.6%    78.6%
Citi                          0.4%     0.1%     0.3%    78.1%
ClearView Economics           0.5%     0.2%     0.2%    78.3%
Comerica                      0.5%     0.2%     0.2%    78.3%
Commerzbank AG                0.4%     0.1%     0.2%    78.2%
Credit Agricole CIB           0.6%     0.2%     0.2%    78.3%
Credit Suisse                 0.5%     0.2%     0.2%    78.3%
Daiwa Securities America      0.4%     0.2%     0.1%    78.1%
Danske Bank                   0.4%     0.2%     0.0%     ---
DekaBank                      0.6%     0.2%     0.3%    78.3%
Desjardins Group              0.5%     0.1%     0.2%    78.3%
Deutsche Bank Securities      0.4%     0.1%     0.2%    78.3%
Deutsche Postbank AG          0.3%     0.2%     0.0%     ---
DZ Bank                       0.4%     0.2%     0.1%     ---
Exane                         0.5%     0.2%     0.7%     ---
First Trust Advisors          0.5%     0.2%     0.2%    78.3%
FTN Financial                 0.4%     0.0%     0.3%    78.4%
Goldman, Sachs & Co.          0.3%     0.2%     0.2%    78.3%
Hammer Partners               0.5%     0.2%     0.3%     ---
Helaba                        0.3%     0.2%     0.0%    78.2%
High Frequency Economics      0.5%     0.1%     0.1%    78.2%
HSBC Markets                  0.5%     0.2%     0.1%    78.2%
Hugh Johnson Advisors         0.5%     0.2%     0.1%    78.2%
IDEAglobal                    0.6%     0.2%     0.3%    78.5%
IHS Global Insight            0.5%     0.1%     0.3%    78.3%
Informa Global Markets        0.5%     0.1%     0.3%    78.4%
ING Financial Markets         0.4%     0.1%     0.3%    78.2%
Insight Economics             0.5%     0.1%     0.3%    78.3%
Intesa Sanpaulo               0.5%     0.2%     0.1%     ---
J.P. Morgan Chase             0.5%     0.1%     0.2%    78.2%
Janney Montgomery Scott       0.5%     0.1%     0.1%    78.3%
Jefferies & Co.               0.4%     0.2%     0.2%    78.3%
John Hancock Financial        0.2%     0.1%     0.4%    79.0%
Landesbank Berlin             0.3%     0.1%     0.4%    78.3%
Landesbank BW                 0.3%     0.1%     0.0%    78.1%
Lloyds Bank                   0.4%     0.2%     0.4%     ---
Maria Fiorini Ramirez         0.5%     0.2%     ---      ---
Market Securities             0.6%     0.2%     0.3%     ---
MET Capital Advisors          0.7%     0.4%    -1.0%     ---
Moody’s Analytics             0.5%     0.2%    -0.1%    78.1%
Morgan Stanley & Co.          0.5%     0.1%     0.0%    78.1%
National Bank Financial       0.5%     0.2%     0.2%    78.3%
Natixis                       0.2%     0.1%     0.2%    78.3%
Nomura Securities             0.6%     0.2%     0.2%    78.2%
Nord/LB                       0.4%     0.2%     0.1%    78.2%
OSK Group/DMG                 0.5%     0.1%     0.3%     ---
Oxford Economics              0.2%     0.3%     0.2%    78.6%
Pierpont Securities           0.5%     0.2%     0.2%    78.2%
PineBridge Investments        0.3%     0.1%     0.5%     ---
PNC Bank                      0.5%     0.2%     0.4%    78.5%
Raiffeisenbank International  0.5%     0.1%     0.6%    78.6%
Raymond James                 0.4%     0.1%     0.6%    78.6%
RBC Capital Markets           0.6%     0.2%     0.2%    78.3%
RBS Securities                0.5%     0.1%     0.1%    78.2%
Regions Financial             0.5%     0.2%     0.3%    78.3%
Renaissance Macro Research    0.5%     0.1%     0.1%    78.2%
Scotiabank                    0.4%     0.2%     0.2%     ---
SMBC Nikko Securities         0.4%     0.2%     0.4%    78.5%
Societe Generale              0.5%     0.1%    -0.1%    78.0%
Southern Polytechnic State    0.1%     0.2%     0.2%     ---
Standard Chartered            0.5%     0.2%     0.1%    78.3%
Stone & McCarthy              0.5%     0.2%     0.2%    78.2%
TD Securities                 0.4%     0.2%     0.4%    78.4%
UBS                           0.5%     0.2%     0.3%    78.4%
UniCredit Research            0.5%     0.2%     0.3%    78.3%
Union Investment              0.3%     0.2%     0.6%    78.8%
University of Maryland        0.5%     0.2%     0.3%    78.4%
Wells Fargo & Co.             0.5%     0.2%     0.2%    78.3%
Westpac Banking Co.           0.6%     0.2%     0.5%     ---
Wrightson ICAP                0.5%     0.1%     0.0%    78.0%
================================================================

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

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


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Companies Mentioned

  • ANF
    (Abercrombie & Fitch Co)
    • $39.34 USD
    • 0.20
    • 0.51%
  • SWY
    (Safeway Inc)
    • $34.46 USD
    • -0.35
    • -1.02%
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