Consumer prices surge on record energy

WASHINGTON (Reuters) – U.S. consumer prices shot up an
unexpectedly large 1.2 percent last month, the biggest gain in
more than 25 years, as hurricanes Katrina and Rita led to the
biggest energy-price surge on record, a government report
showed on Friday.

But outside of food and energy costs, prices were tame —
rising a scant 0.1 percent for the fifth straight month, the
Labor Department said, offering some hope a broad inflation
increase could be averted.

The increase in the consumer price index — the largest
since March 1980 — outstripped Wall Street forecasts for a 0.9
percent gain, but the rise in the so-called core price index
came in a touch below the 0.2 percent expected.

Energy prices shot up 12 percent, the biggest gain on
records dating to 1957, as prices for gasoline, natural gas and
fuel oil all skyrocketed in the wake of Hurricane Katrina and
its milder successor Hurricane Rita.

Gasoline prices, which hit an all-time high in the week
after Katrina, jumped a record 17.9 percent in September, while
natural gas and fuel oil costs each rose more than 12 percent,
both the biggest gains since early 2003.

Over the past 12 months, energy costs have climbed a steep
34.8 percent, the biggest 12-month gain since the period ending
May 1980. Gasoline prices are up more than 50 percent.

A separate Labor Department report on Friday underscored
the degree to which the energy-fed inflation of the past year
has left consumers worse off. The department said average
weekly earnings adjusted for inflation have fallen 2.7 percent
in the 12 months through September.

Still, the consumer price report showed little sign lofty
energy costs were affecting other costs.

Food prices, which had been steady in August, climbed just
0.3 percent last month.

Hotel prices tumbled sharply and apparel prices slipped a
touch after a big gain in August. However, the cost of new
vehicles, medical care and communication more than offset those
drops, the department said.