U.S. CPI dips in Aug.; home starts hit 12-year low


Reuters

WASHINGTON — U.S. consumer prices unexpectedly dipped 0.1 percent last month and new home construction hit a 12-year low, data on Wednesday showed, underlining concerns about the country’s economic outlook.

August consumer prices were pushed lower by slumping energy costs and posted their first decline since October, the Labor Department said, while core inflation rose as expected.

Excluding volatile food and energy price, core inflation advanced 0.2 percent last month matching the forecast and July’s rise, the Labor Department said.

U.S. home construction fell 2.6 percent last month to their lowest in more than 12 years, while building permit activity, a sign of future construction plans, also dropped to a low not seen since mid-1995.

Building permits fell 5.9 percent to an annual rate of 1.307 million, also the lowest since June 1995 when they reached 1.305 million.

Inflation is under scrutiny by the Federal Reserve, which on Tuesday slashed interest rates by a half percentage point to 4.75 percent to shield the economy from the housing market slump, but also warned it was monitoring price pressures.

However, U.S. oil prices topped a fresh record above $82 a barrel on Tuesday, in a warning that rising fuel costs may yet pressure inflation.

Consumer prices in the 12 months since August 2006 were up 2.0 percent while core CPI gained 2.1 percent. These results compare with a forecast for a 2.1 percent year on-year rise in headline CPI and 2.2 percent increase in core.

The Fed cut borrowing costs partly in response to fallout from the slumping housing market and August housing starts confirmed that the sector remained in trouble.