There is finally a little good news for consumers: Consumer prices were flat last month as a drop in costs for gasoline, clothes and new cars, helped to offset rising prices of food and medical care.

Meanwhile, new claims for jobless benefits dropped more than expected last week as the impact of two hurricanes in September faded.

The new reading on the Consumer Price Index, the government's most closely watched inflation barometer, came after prices actually dipped by 0.1 percent in August, the Labor Department reported Thursday.

Those two months, however, had offered Americans a rare reprieve. Consumer prices have marched upward most of the year, spiking by an eye popping 1.1 percent in June.

The toll of galloping prices for much of this year is eating into paychecks, further straining consumers who are pulling back sharply. Recent readings on retail sales were grim. The prospects that consumers will retrench further would spell more trouble for the already ailing economy.

Stripping out energy and food products, "core" prices inched up by just 0.1 percent in September, an improvement from a 0.2 percent advance in August.

The latest showing on inflation was better than economists expected. They were forecasting a 0.1 percent increase in overall prices and a 0.2 percent rise minus energy and food.

In addition, the Labor Department says initial claims for unemployment insurance last week fell 16,000 to a seasonally adjusted level of 461,000. That's below analysts' expectations of 475,000.

Despite the decline, the total remains at levels economists associate with a recession and is high by historical standards. Last year, claims stood at 338,000.

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