Surging energy costs drove US consumer prices up by a hefty and larger than expected 0.6% last month, the biggest jump since May, a government report showed today.
The US Labor Department said a 4.2% rise in energy prices in October accounted for over half of the overall rise in the consumer price index, the most widely used gauge of US inflation. Economists on Wall Street had expected energy prices to soar, but thought the CPI would advance just 0.4%.
Excluding volatile food and energy prices, the CPI rose a moderate 0.2%, a slowdown from a 0.3% September advance but a touch higher than the 0.1% gain expected on Wall Street.
The report was likely to keep alive inflation concerns ignited by news yesterday that prices received by producers in October posted their largest rise since January 1990.
Economists said the producer price report buttressed the case for continued interest rate rises from the Federal Reserve, which bumped up overnight borrowing costs by a quarter percentage point to 2% last week.
The data on consumer prices showed that petrol costs shot up 8.6% and fuel oil prices up 9.4%, the biggest increase for both since February 2003. Natural gas prices rose 0.6%, but electricity costs fell 1.6%. Food prices also posted a steep rise last month, gaining 0.6%.
Analysts had said a big jump in food costs at the producer level in October reflected the impact of recent hurricanes in the Southeast.
The cost of lodging, such as hotel rooms and college dorms, and prices for used cars - two categories that helped fuel an acceleration in core inflation in September - rose at a more moderate pace last month.
But the cost of new cars rose 0.4% last month after a 0.2% September drop and apparel prices gained 0.2% after an unchanged reading, a combination that partially offset the lodging and used car impact.
Separate Commerce Department figures showed that sales of new homes in the US shot up 6.4% to a 10-month high in October, as interest rates remained low.
Sales were up 6.4% from September to a seasonally adjusted annual rate of 2.027 million homes in October -the highest level of housing starts since last December's 2.067 million. The figure exceeded analysts' forecasts for sales of 1.96 million homes.
