Consumer prices fall by largest amount in 10 months; Core Inflation Edges Up

The Labor Department reported that the Consumer Price Index (CPI) fell 0.5% in September, compared to the 0.2% increase in August. It was the biggest decline since a 0.7% fall in November, 2005, driven by a large 7.2% drop in energy prices. Gasoline prices fell by 13.5% last month, the biggest one-month decline since a drop of 16.1% last November. Core inflation (core CPI) - which excludes energy and food - edged up by 0.2%. 
Consumer prices increased at a seasonally adjusted annual rate (SAAR) of 0.8% in the third quarter of 2006, following increases in the first and second quarters at annual rates of 4.3% and 5.1%, respectively. This brings the year-to-date annual rate to 3.4%, the same as for all of 2005. 

The index for energy, which advanced at annual rates of 21.8% 23.8%t in the first two quarters, declined at a 15.6% rate in the third quarter of 2006. Thus far this year, energy costs have risen at an 8.3% SAAR after increasing 17.1% in all of 2005. 

The food index rose at a 2.6% SAAR in the first nine months of 2006. The index for grocery store food prices increased at a 2.2% rate. 

The core CPI - excluding food and energy - advanced at a 2.7 percent SAAR in the third quarter, following increases at rates of 2.8 and 3.6 percent in the first two quarters of 2006. The advance at a 3.0 percent SAAR for the first nine months of 2006 compares with a 2.2 percent rise in all of 2005. Almost 80 percent of the overall acceleration was accounted for by the larger increase in the index for shelter. Shelter costs, which rose 2.6 percent in all of 2005, have risen at a 4.1 percent annual rate in the first nine months of 2006. An upturn in the index for apparel accounted for about 18 percent of the acceleration thus far in 2006. The annual rates for selected groups for the last seven and three-quarter years are shown below.

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