Inflation Isn't Likely to Take Off Anytime Soon, Economists Say -- Update
December 11 2019 - 1:42PM
Dow Jones News
By Sarah Chaney
WASHINGTON -- Inflation isn't likely to take off anytime soon,
recent readings on prices and labor costs show.
Consumer prices rose at a 2.1% annual pace in November, from
1.8% in October, mainly due to higher energy and shelter costs, the
Labor Department said on Wednesday. Meanwhile, U.S. unit labor
costs -- a measure of labor costs and production output -- were
revised down sharply for the second and third quarters in a Tuesday
productivity report.
The readings suggest that companies have less pricing power due
to factors including globalization and consumers' growing tendency
toward comparison shopping, say economists, who expect these trends
to continue even though U.S. unemployment is at historic lows and
companies face higher prices for some products tied to tariffs.
"Our outlook is that this tame inflation environment continues,"
said Kathy Bostjancic, U.S. chief financial economist at Oxford
Economics.
Wednesday's consumer-price index figures are unlikely to sway
the Fed's interest-rate decision, which the central bank will
announce later in the day. Fed officials have lowered their
short-term benchmark rate three times this year but have indicated
they are prepared to hold rates steady now.
The U.S. placed levies on a range of Chinese imports in
September as part of the U.S.-China trade war, but those tariffs
don't appear to be having a broad-based inflationary impact
yet.
Core consumer prices, which exclude often-volatile food and
energy categories, rose 2.3% over the year in November, in line
with October.
Overall core goods prices were weak in November, Wednesday's CPI
report showed. Prices for apparel, for instance, rose only 0.1% in
November, while prices for toys fell 1.1%.
Further, the unemployment rate hit a 50-year low in November,
but this has yet to translate into a meaningful pickup in
inflation.
Sarah House, senior economist at Wells Fargo, said that while
low unemployment has helped underpin wage growth, especially for
rank-and-file workers, companies are more reluctant to pass along
labor costs in the form of price increases than in the past.
"It's not so much that the old rules of cost pressures stemming
from wages are completely gone," Ms. House said. "They're just
playing a smaller role than they have previously."
The Fed follows the consumer-price index for clues about the
trajectory of inflation, though the central bank's inflation target
of 2% is tied to a separate measure, the Commerce Department's
price index for personal-consumption expenditures, which rose 1.3%
year-over-year in October, the same rate as in September.
The consumer-price index tends to run a bit higher than the
personal-consumption index, but both gauges generally follow the
same path.
Harriet Torry contributed to this article.
Write to Sarah Chaney at sarah.chaney@wsj.com
(END) Dow Jones Newswires
December 11, 2019 13:27 ET (18:27 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.