U.S. CONSUMER INFLATION EASES
Slowdown driven by cheaper gas, cars and housing, signaling Fed will less likely impose another rate hike
Inflation in the United States slowed last month in a sign that the Federal Reserve’s interest rate hikes are continuing to cool the consumer price spikes that have bedeviled consumers for the past two years.
Tuesday’s report from the Labor Department showed that prices either fell or rose more slowly across a broad range of goods and services, including gas, new and used cars, hotel rooms and housing. Overall inflation was unchanged from September to October, down from the 0.4 percent jump the previous month. Compared with 12 months ago, consumer prices rose 3.2 percent in October, down from the 3.7 percent rise in September and the smallest year-over-year increase since June.
Excluding volatile food and energy prices, so-called core prices also slowed. They rose just 0.2 percent from September to October, slightly below the pace of the previous two months. Economists closely track core prices, which are thought to provide a good sign of inflation’s future path. Measured year over year, core prices rose 4 percent in October, down from 4.1 percent in September, the smallest rise in two years.
“The inflation fever has broken,” said Bill Adams, chief economist at Comerica Bank. “Rising petroleum production is holding down gas prices, house prices are rising more slowly after mortgage rates surged in 2023 and rents are also rising more gradually” as more apartment buildings are completed.
Gas prices fell 5 percent from
September to October and are down 5.3 percent from a year earlier. They have continued to fall into November, suggesting that cheaper energy could hold down inflation this month as well. Prices at the pump averaged $3.35 Tuesday, down 42 cents from a year earlier.
Grocery store prices rose 0.3 percent last month and 2.1 percent from a year earlier. Though still above pre-pandemic inflation, the year-over-year rise is down from double-digit increases earlier this year. Bread and beef prices surged in October and are much more expensive than they were a year ago. Milk and egg costs ticked higher last month but have fallen compared with a year earlier.
October’s milder-than-expected price figures make it much less likely that the Fed will impose another rate hike, economists said. Fed officials, led by Chair Jerome Powell, are considering whether their benchmark rate is high enough to quell inflation or if they need to impose another increase in coming months.
Powell had said last week that Fed officials were “not confident” that rates were sufficiently high to tame inflation. The Fed has raised its benchmark interest rate 11 times in the past year and a half, to about 5.4 percent, the highest level in 22 years.
But the central bank has raised its key rate just once since May. Since its last meeting on Nov. 1, a government report showed that hiring cooled in October compared with September, and wage growth slowed, thereby easing pressure on
being depicted as Google foe and ally in this trial.
Pichai’s latest testimony came 15 days after he traveled to Washington, D.C., to take the stand in a separate antitrust trial revolving around the Justice Department’s allegations that Google has stifled competition and innovation by abusing the power of the dominant search engine that launched the company in 1998.
Although the two trials are unfolding on opposite ends of the country and are delving into different parts of a company that investors value at $1.7 trillion, they are touching upon at least two common issues — Google’s immense power and its unusual relationship with Apple, an even bigger tech powerhouse.
A key part of Google’s defense against the allegations that its Play Store is running an illegal monopoly on Android apps hinges on the assertion that the company faces major competition from Apple’s iPhone, mobile operating system and app store.
Meanwhile, the Justice Department’s case against Google in Washington is focused largely on deals that the company negotiated with Apple to ensure Google’s search engine automatically fields queries entered on iPhones and Apple’s Safari browser.
After Monday testimony from an expert witness in the Washington antitrust trial revealed Google shared 36 percent of its ad revenue from Safari search queries with Apple in 2021, Pichai was forced to confirm the figure Tuesday in San Francisco under often combative questioning by Epic lawyer Lauren Moskowitz.
Things got so tense that before recessing for a short break, U.S. District Judge James Donato described the back-and-forth between Epic’s lawyer and Pichai as a “rocking 75 minutes.”
Before the testimony began, Donato had granted Moskowitz’s request to disclose the precise amount of money that Google paid Apple in 2021 over objections from both Google and Apple lawyers, but she never got that specific.
Instead, Moskowitz got Pichai to acknowledge that Apple received the bulk of the $26.3 billion that Google paid for all of its 2021 deals that locked in its search engine as the automatic handler of queries on smartphones and web browsers. Analysts have estimated Apple’s annual take from Google to be in the range of $15 billion to $20 billion.
Moskowitz also pointed out that Apple’s 36 percent cut from Google’s search ad revenue in the Safari browser was more than twice the 16 percent rate paid to Samsung, the biggest seller of Android smartphones. That point seemed to be aimed at painting Apple as one of Google’s biggest business partners, rather than a major competitor.
Although he sometimes seemed to be caught off balance by Moskowitz’s aggressive questioning, Pichai never wavered from his insistence that Google and Android compete “fiercely” with Apple and the iPhone — a rivalry he asserted has given consumers more choices and driven down prices.
“We enable more affordable smartphones,” Pichai said of Android, which Google gives away to Samsung and other smartphone manufacturers for free in exchange for putting the company’s search engine and other services, such as its Play Store, on the devices. That, Pichai added, “is very different from what Apple does.”
Evidence submitted Tuesday showed just how lucrative the Play Store has been for Google. During the first half of 2020, for instance, the Play Store generated an operating profit of $4.4 billion.
Steered by questioning from a Google lawyer, Pichai pointed out that figure didn’t account for the billions of dollars that the company spends on the Android operating system that ensures people have other smartphone options than then iPhone.