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The price at the cash register ticked higher in October, though it was driven by the cost at the pump and on the lot.
Energy prices and new car sales (the highest in 28 years) pushed consumer prices upward in October, they're still cheaper than they were a year earlier. The Labor Department reports that consumer prices edged up 0.3% last month, a tad higher than the 0.2% anticipated. Take food and energy out of the equation, and inflation rose 0.2%, again ahead of the 0.1% that analysts expected.
Inflation is being contained, at least in part, by the unemployment rate. At 10.2%, unemployment is at its highest level in 26 years. So, even though economists believe the recession ended over the summer, constrained incomes will continue to put pressure on consumer spending for a while, which in turn will keep prices from increasing.
The missing component in a recovery right now is household income. Consumer spending accounts for 70% of the U.S. economy, but it can't take off until consumers have something to spend. A tenuous job market leads even those employed to be careful, which keeps consumer goods from flying off the shelves. There are several signs that consumer activity could turn the corner soon, but we won't know anything worth making decisions on until the holiday retail numbers are out.
Until we see what Santa brought the likes of Walmart (WMT), Target (TGT) and Costco (COST) for Christmas, it's all guesswork.
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