Grocery prices up, but only modestly
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.