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.
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.
The core CPI rose slightly less in October than it did in September, when it increased 0.3 percent. But the index rose faster in September and October than in each of the preceding three months, when it increased by just 0.1 percent.
The CPI rose 3.2 percent in the 12 months that ended in October, up from 2.5 percent in the year ended in September. The core measure rose 2 percent in the past 12 months.
"The message is that inflation is creeping higher," Maury Harris, chief U.S. economist at UBS Investment Research, wrote in an analysis for clients.
The CPI report makes it more likely that the Fed will raise short-term rates at its meeting next month to keep inflation under control, said Harris and other analysts. The central bank raised its benchmark rate last week for the fourth time in six months, to 2 percent -- a percentage point higher than when increases began in June.
If inflation cools, the Fed may well slow the pace of rate increases in the coming year. But if prices keep drifting upward, central bank policymakers may increase rates more briskly.
Wholesale inflation climbed much faster than consumer inflation in October, as businesses passed on only a small portion of their higher energy and materials costs as they have for most of this year.
Businesses have not raised consumer prices more this year for a variety of reasons. They have not wanted to lose market share to competitors at home or abroad. The strong dollar has meant imported goods were cheap relative to those made in the United States. And rapid growth in productivity, or output per hour of labor, has boosted corporate profits, providing a cushion for absorbing cost increases.
But the dollar has declined recently, causing import prices to climb. And productivity growth has slowed, which means profits will be squeezed more as businesses' costs rise. Slower productivity growth also means that companies eventually will have to hire more people if they want to expand production to keep up with rising demand.
"The inflation rate is likely to inch higher in the months ahead," wrote Dean Baker, an economist at the Center for Economic Policy and Research. He noted influences such as the dollar and slowing productivity growth, and added: "If the labor market improves, workers will demand wage increases to restore lost purchasing power and get real wage growth."