US consumer prices flat as inflation continues to cool

Washington: Consumer prices stayed flat in November, further evidence that inflation has cooled off.

Energy costs dropped for the second straight month, which offset higher prices that Americans paid for food, clothes and medical services.

Milder inflation offers some relief to consumers, who were hit earlier this year with a surge in gas and food prices. It also gives the Federal Reserve leeway to act further to boost the economy without fanning inflation.

"This is more good news for the consumer," said Jim Baird, chief investment strategist at Plante Moran Financial Advisors. "The pace of inflation has clearly moderated in recent months."

The consumer price index was unchanged in November, the US Labour Department said on Friday. That followed a 0.1 per cent decrease in October.

Core prices

Excluding volatile food and energy costs, so-called "core" prices rose 0.2 per cent.

In the 12 months ending in November, prices rose 3.4 per cent, below October's 3.5 per cent pace and the smallest year-over-year rise since April.

Core prices have risen 2.2 per cent in the past 12 months, the most in more than three years. More expensive clothing and higher prices for rent have driven the core index up in that time.

Over the past 12 months, clothing prices have increased at the fastest pace in 20 years. That's largely because of higher cotton costs.

Still, core price increases have slowed recently. And cotton prices are half what they were a year ago, which should lead to lower clothing prices next year.

Many economists say inflation probably has peaked and is likely to decline next year. Slower growth in China and a possible recession in Europe have reduced global demand for energy and other goods. That should hold down the price of oil and other commodities.

Petrol prices have also declined. Nationwide, petrol cost an average of $3.25 a gallon (86 cents a litre) Friday, down from $3.40 a month ago, according to AAA.

Stagnant pay should also hold down inflation next year. Americans can't afford to pay higher prices without higher wages. But in the past year, average hourly inflation-adjusted pay fell 1.5 per cent. That makes it harder for retailers to raise prices.

If inflation eases next year, the Fed might be more inclined to launch another bond-buying programme to further reduce interest rates, should it decide the economy needs it.

Lower rates would make it cheaper for companies and individuals to borrow and spend.