Consumer Prices Nudge Up

U.S. consumer prices rose an as-expected 0.2 percent last month, a government report showed on Tuesday, but a sharp jump in lodging costs helped push so-called core inflation up at its fastest pace in five months.

A 0.4 percent drop in energy prices in September, the third straight monthly decline, helped temper the rise in the consumer price index, the most widely used gauge of U.S. inflation, the Labor Department (search) said.

While food prices held steady, the core CPI (search), which strips out volatile food and energy costs to provide a better picture of underlying inflation trends, climbed 0.3 percent, the biggest gain since April.

Economists on Wall Street had expected both the overall index and the core measure to advance 0.2 percent.

Analysts said ahead of the report it would present an understated view of the inflation environment because it would not reflect a recent sharp rise in oil prices, an increase that has already been reflected in higher gasoline costs.

In September, gasoline prices rose a mild 0.1 percent, the report showed. Fuel oil costs shot up 2.1 percent, but natural gas prices slid 3.1 percent and electricity costs held steady.

U.S. light crude (search) carved out a new high at $55.33 a barrel on Monday, but settled down $1.26 for the day at $53.67 a barrel on signs lofty prices were restraining economic growth. Crude prices eased further on Tuesday.

The department said a 2.9 percent jump in the cost of lodging — such as hotels and college dorms — accounted for about three-quarters of the September acceleration in the core CPI, which had risen only 0.1 percent in each of the prior three months. Lodging costs had fallen 1.7 percent in August.

Despite the pickup in the pace of underlying inflation, core prices have risen at only a 1.8 percent annual rate over the past three months, a slower rate than registered in either the first or second quarters.

The department said the cost of housing rose 0.2 percent in September, the same as in August and July. In addition, apparel costs were unchanged after two monthly drops, while the price of medical care rose 0.3 percent after a 0.2 percent gain in August.