Consumer prices edge up 0.3 percent in October as energy and new car prices both advance

Consumer prices up 0.3 percent in October

WASHINGTON — Consumer prices edged up faster than expected in October, driven higher by another increase in energy prices and the biggest jump in new car prices in 28 years.

Still, prices are lower than they were a year ago and inflation is expected to remain subdued amid a slow economic recovery.

The Labor Department said Wednesday that consumer prices rose 0.3 percent in October, a bit more than the 0.2 percent economists had expected. Core inflation, which excludes energy and food, rose 0.2 percent, compared with analysts’ expectation for a 0.1 percent rise.

Overall prices since October 2008 are down 0.2 percent, reflecting the effects of the longest recession since the 1930s. Even though economists believe the downturn ended over the summer, the unemployment rate has continued to rise, hitting a 26-year high of 10.2 percent in October.

Weak labor markets have kept a lid on wage pressures and the fragile economy has made it tough for businesses to raise the price of their products.

The absence of inflation has given the Federal Reserve the room to push a key interest rate to a record low near zero in an effort to boost the economy.

Fed Chairman Ben Bernanke said earlier this week that he expected inflation would remain “subdued for some time.” Many economists don’t believe the Fed will even consider beginning to raise interest rates until the unemployment rate peaks, probably next summer.

For October, energy prices rose 1.5 percent, the biggest increase since a 4.6 percent jump in August. A 6.3 percent rise in home heating oil and a 1.6 percent increase in gasoline prices drove the advance.

Crude prices have been hovering around $79 a barrel for more than a month, an increase from the lows around $32 hit last December, but still below the record-high of $147 per barrel hit in July 2008.

Food prices edged up 0.1 percent in October as a big jump in prices of dairy products was partially offset by a drop in the category that includes meats, poultry and fish.

Outside of food and energy, a 1.6 percent surge in the cost of new autos drove the 0.2 percent rise in core inflation. The price of used cars and trucks also rose sharply, increased 3.4 percent in October, the biggest rise since September 1980.

Analysts said the jump in used car prices partially reflected the government’s Cash for Clunkers program, which has reduced the stockpile of used vehicles since cars which qualified for that program were junked and therefore not available for resale.

The advance in both new and used car prices accounted for 90 percent of the increase in core inflation last month, government analysts said.

Airline fares rose 1.7 percent, reflecting higher fuel costs, but clothing costs dropped 0.4 percent drop in October as the weak economy has made it difficult for department stores to boost prices.

Bernanke warned in his speech Monday that “headwinds” — including rising unemployment and hard-to-get credit — will restrain the recovery.