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Gas and Produce Prices Drive Increase in Consumer Index

By Nell Henderson
Washington Post Staff Writer
Thursday, November 18, 2004; Page E01

Consumers paid sharply more for fruits, vegetables and gasoline last month, the government reported yesterday, suggesting that inflation may be stirring again after being dormant for several months.

The consumer price index, the most widely followed U.S. inflation gauge, increased 0.6 percent in October, the most since May, and three times the pace in September, the Labor Department said.


October food prices rose 0.8 percent, largely because of a 6 percent increase in the cost of fruits and vegetables. (Steven E. Frischling -- Bloomberg News)

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Consumer prices also rose faster than workers' pay, cutting into household buying power. Average weekly earnings, after adjusting for inflation, fell 0.4 percent last month, the department said in a separate report.

The seasonally adjusted CPI was boosted largely by food and energy costs, which were driven higher by the late summer spate of hurricanes that wiped out many crops and disrupted Gulf of Mexico oil production, analysts said. The storms helped push the price of gasoline temporarily above $2 a gallon.

Food and energy costs should come down somewhat in coming months, as produce and oil supplies are restored, analysts said. The national average price for a gallon of regular gasoline has already fallen to $1.96, according to the AAA automobile club.

The hurricanes' effects rippled through the economy in other ways, several reports showed. Production by the nation's factories, mines and utilities rose 0.7 percent in October, a strong pickup after two very weak months, the Federal Reserve reported. Part of that increase reflected "a partial bounceback" from levels that had been depressed by the hurricanes, the Fed said.

Builders broke ground on 6.4 percent more new housing units in October than in September, the Commerce Department said. Most of the gain was a reflection of the booming housing market, but some portion reflected projects that had been postponed by the storms, analysts said.

Post-hurricane cleanup and reconstruction also helped job growth last month, the Labor Department reported earlier.

The hurricanes thus distorted many measures of the economy's performance in October, but analysts said an increase in inflation was nonetheless apparent.

Because food and energy prices can swing greatly month to month, economists often look at other prices to get a better sense of the underlying trend. Excluding food and energy costs, the so-called core CPI rose a modest 0.2 percent in October as consumers paid more for apparel, medical care, education and airline tickets.


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