The cost of living excluding food and fuel rose again in October after picking up the prior month, showing inflation edging closer toward the Federal Reserve’s goal.
The core consumer-price index increased 0.2 percent for a second month as rents continued to climb and health-care costs rebounded, a Labor Department report showed Tuesday. It was the strongest back-to-back readings since May and April. Including the volatile food and fuel categories, the index also advanced 0.2 percent.
While weak global growth and a strong dollar have held down the cost of commodities such as fuel, Americans are paying more for services including rents and medical care. Fed officials, considering the first benchmark interest-rate increase since 2006, are looking for signs that labor-market progress will help boost inflation to around 2 percent.
“It’s a slow process, and the one thing that I think would speed it up notably would be a firmer global growth outlook,” Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Alabama, said before the report.
Last month’s readings matched the median forecast in a Bloomberg survey of 82 economists. Estimates for total CPI ranged from a 0.1 percent decline to a 0.3 percent gain. Core prices were also projected to rise 0.2 percent.
Consumer prices climbed 0.2 percent in the 12 months ended in October after being little changed in the year through September.
Energy costs increased 0.3 percent in October, the first gain in three months, after dropping 4.7 percent a month earlier, the report showed. Food costs increased 0.1 percent, the smallest advance since May.
The gain in the core index reflected a 0.3 percent increase in rents and a 0.7 percent advance in health care, the biggest since April. Airline fares also rose following three straight declines.
Services excluding energy rose 0.3 percent in October for a second month, the biggest back-to-back gains since April, May 2014.
Energy prices remain a restraint on inflation, helping to boost consumer spending power. The average cost of a gallon of regular gasoline was $2.16 on Nov. 15, according to AAA, the biggest U.S. auto group. That compares with an average $2.46 this year and $3.34 in 2014.
While Americans are pocketing much of the savings at the gas pump, steady hiring has the potential to spur spending as well bigger wage gains. Job growth surged in October by the most this year, while hourly earnings rose from a year ago by the most since 2009.
Policy makers have said they’ll need to be convinced that overall inflation is on a stable path before raising the benchmark interest rate. The central bank’s preferred price-growth gauge is the Commerce Department’s personal consumption expenditures measure, which hasn’t met the Fed’s 2 percent goal since April 2012.
The CPI is the broadest of three price gauges from the Labor Department because it includes all goods and services. About 60 percent of the index covers prices consumers pay for services from medical visits to airline fares, movie tickets and rents.
The Labor Department’s gauge of wholesale prices, which includes 75 percent of all U.S. goods and services, decreased
0.4 percent in October from the prior month as costs fell for food and new-model light trucks. A separate report showed the cost of imported goods fell 0.5 percent in October, marking the 14th decline in the last 16 months.