US consumer prices dropped last month, the second decline in four months, more evidence the weakening economy is keeping inflation in check.
The consumer price index fell 0.3 percent last month, reflecting lower costs for gasoline, airfares and hotels, after rising 0.4 percent in September, the Labor Department said.
Excluding volatile food and energy costs, the index rose 0.2 percent, matching September's gain.
Gasoline prices plunged as the economy teetered on the edge of recession, giving shoppers extra money to spend on discounted items.
The last time the consumer price index fell twice within a four-month period was February through April 1986. Aside from this year, the CPI has dropped only one other time in the past 15 years.
So far this year, the CPI is rising at a 2.1 percent annual pace, compared with a 3.6 percent pace in the same period last year. The core rate is increasing at a 2.8 percent pace, compared with a 2.6 percent rate through October of last year.
The US economy contracted at an annual rate of 0.4 percent in the third quarter, the first decline since 1993, as consumer spending cooled and business spending slumped. Many analysts say the economy may contract again this quarter, meeting the common definition of a recession.
"Inflation in the US has been relatively low and stable," Fed Bank of San Francisco President Robert Parry said Thursday at the University of Washington Business School in Seattle. "It has allowed the Fed the flexibility to ease policy aggressively."
Energy prices, which account for about a 12th of the index, fell 6.3 percent last month after rising 2.6 percent in September. October's decline was the biggest since March 1986, when energy costs fell 6.9 percent.
Transportation costs fell 2.2 percent last month, reflecting a decline in air fares and the drop in gasoline. Air fares fell 2.5 percent. Most major US airlines matched Delta, the third-largest US carrier, in cutting fares as much as 50 percent last month on routes worldwide to lure travelers back onto planes. After the hijackings scared away travel-ers, the 10 biggest US airlines had a combined 32 percent decline in passenger traffic for the month.
New car prices rose 0.1 percent last month after showing no change in September. The increase was based on the car's sticker price, which rose with the introduction of 2002 model cars.
Hotel prices fell 1.8 percent, the second straight drop, as business travel stayed weak and tourists canceled travel plans.
The CPI is the government's broadest gauge of costs for goods and services. About 55 percent of the CPI covers prices consumers pay for services, ranging from medical visits to airline fares and movie tickets. Goods, including food, clothing, autos and appliances, make up the rest.
In a separate report, the Labor Department said average weekly earnings adjusted for inflation rose 0.2 percent last month after increasing 0.1 percent in September.
The drop in some consumer prices has spurred fears among some economists about deflation -- a drop in general price levels over an extended period of time. Fed president Parry said Thursday that such fears are misplaced.
"In the US, I think the chances of experiencing deflation are small," he said. "I am sure we are going to see a fairly weak CPI, because the economy is weak, but the idea that we are launching into a prolonged period of declining prices I don't think has substance."
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