"It's difficult for firms to raise prices in the current environment. Labor costs are low, profit margins are good"
- Gus Faucher, senior economist at PNC Bank in Pittsburgh
Consumer prices in the world's biggest economy dropped significantly in November due to the sharp drop in petrol prices, the Labor Department reported Friday. The consumer price index tumbled a seasonally adjusted 0.3% last month, from a 0.1% gain in the previous month, posting a first decline since May. At the same time core prices, which exclude food and energy, edged up 0.1% in November. The gasoline index dropped 7.4% and offset gains in prices elsewhere, while retail sales, excluding gas-station purchases, rose 0.8% last month. Facing risk of inflation, the Federal Reserve expanded its asset-purchase programme in a continuing bid to reduce the unemployment rate and support growth. In the meantime, the Fed cut its economic outlook, saying the U.S. economy will grow between 1.7-1.8% this year, down from 1.7-2.0%.
"Inflation remains tame," said Gus Faucher, senior economist at PNC Bank in Pittsburgh, who correctly forecast the decline. "It's difficult for firms to raise prices in the current environment. Labor costs are low, profit margins are good."
"The inflation data continues to be benign and there is very little in the way of price pressures in the economy," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
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