Rise in U.S. Consumer Inflation Pressures Gold Futures

Consumer prices in the US increased in line with economist estimates in the month of October, according to a report released by the Labor Department on Tuesday.

The food index has increased 1.6 percent over the past year, and the index for all items less food and energy has risen 1.9 percent. Year on year, consumer prices were 0.2% higher from the same month a year earlier, compared to expectations for a 0.1% increase.

The ONS said that climbing prices in clothing, footwear and recreational goods were offset by dips in the cost of university tuition fees, food, alcohol and tobacco, resulting in no change to the overall rate of inflation from last month.

With underlying inflation edging higher and energy deflation about to wind down, the Fed likely will see today’s CPI report as another reason to begin raising interest rates at the December meeting. It is now apparent that the downward pressure from the continued strength in dollar and lowered oil prices is easing off. Real or inflation-adjusted hourly wages advanced 0.2% in October.

Using the old Retail Prices Index (RPI) measure inflation stood at 0.7 percent with the updated RPIJ registering 0.0 percent.

Still, the increase in manufacturing output was another indication that economic growth would accelerate in the fourth quarter after braking to a 1.5 percent annual rate in the July-September quarter.

Mr Carney said CPI was unlikely to stay close to zero “much beyond the end of the year”, but the Bank forecast that inflation was set to stay below 1% until the second half of 2016. The price index for medical care services rose 0.8% in October, pushing the year-over-year rise to 3%. Inflation has been persistently under the target.

As the chart above attests, the difference between headline and core inflation is nearly entirely due to energy prices. Hospital costs increased 2.0 percent. Four of the six major grocery store food group indexes rose last month, with cereals and bakery products posting the largest increase since August 2011.

Global economic pressures are also dampening inflation.

The Fed prefers a different inflation gauge, the price index for personal consumption expenditures, which includes a broader range of goods and services consumed in the USA than the CPI and assigns them different weights. In October, the index for manufacturing moved up 0.4 percent, while the index for mining fell 1.5 percent and the index for utilities dropped 2.5 percent.