Gro­cery prices up, but only mod­estly

Econ­omy

Austin American-Statesman - - BUSINESS - Con­tin­ued from B

points to 13,135. All three stock-mar­ket mea­sures ended the week with a loss.

Ex­clud­ing the volatile food and gas cat­e­gories, con­sumer prices ticked up 0.1 per­cent in Novem­ber. Core prices have risen 1.9 per­cent in the past year — be­low the Fed­eral Re­serve’s an­nual tar­get of 2 per­cent.

Higher rents, air­line fares and new cars pushed up core prices last month. The cost of cloth­ing and used cars fell.

“In sim­plest terms, in­fla­tion is not a prob­lem,” Jim Baird, chief in­vest­ment strate­gist at Plante Mo­ran Fi­nan­cial Ad­vi­sors, said. Lower in­fla­tion “is a real pos­i­tive that should pro­vide mod­est re­lief for house­holds deal­ing with lim­ited in­come growth.”

High un­em­ploy­ment and slow wage growth have made busi­nesses re­luc­tant to raise prices. Many worry higher prices could drive away cus­tomers. That’s helped keep in­fla­tion tame.

Mod­est in­fla­tion leaves con­sumers with more money to spend, which can boost eco­nomic growth. Lower in­fla­tion also makes it eas­ier for the Fed to con­tinue with its ef­forts to rekin­dle the econ­omy. If the Fed were wor­ried that prices are ris­ing too fast, it might have to raise in­ter­est rates.

Gas prices have fallen sharply in the past two months af­ter spik­ing in the late sum­mer. A gal­lon of gas cost an av­er­age of $3.29 na­tion­wide Fri­day. That’s 15 cents less than a month ago and 50 cents less than in mid-Oc­to­ber.

The in­crease in food prices was smaller than many econ­o­mists ex­pected. This sum­mer’s drought in the Mid­west, which scorched corn and soy­bean crops, has pushed up food prices. But the in­crease hasn’t been dra­matic so far. Food costs have risen 1.8 per­cent in the past 12 months.

Some items have seen big in­creases. The cost of milk, cheese and other dairy prod­ucts have risen 0.8 per­cent in each of the past two months. That could re­flect the higher cost of an­i­mal feed, which usu­ally in­cludes corn and soy­beans. Ce­re­als and baked goods rose 0.3 per­cent last month. But prices for the broad cat­e­gory of meat, chicken, fish and eggs fell in Novem­ber, af­ter a big gain the pre­vi­ous month.

Shop­pers may face fur­ther in­creases soon. Whole­sale food costs jumped 1.3 per­cent last month, ac­cord­ing to a sep­a­rate report Thurs­day, the most in nearly two years.

With in­fla­tion in check, the Fed said Wed­nes­day that it now plans to keep the short-term in­ter­est rate it con­trols at nearly zero un­til the un­em­ploy­ment rate falls to at least 6.5 per­cent, as long as in­fla­tion isn’t ex­pected to top 2.5 per­cent in the next two years.

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