Consumer Inflation Almost Invisible

Rising medical and food costs were only partially offset by cheaper cars, clothes and airfare, lifting the consumer price index modestly in November.

The CPI rose 0.1 percent that month and was up 0.2 percent without volatile food and energy costs, the Labor Department reported Tuesday. The increases exactly matched forecasts in a poll of economists by CBS MarketWatch. A month earlier, headline CPI rose 0.3 percent, while the core rate was up 0.2 percent.

In a separate report, the Commerce Department said that construction of new homes was up 2.4 percent in November as the lowest mortgage rates since the 1960s continued to make housing the strongest sector of the economy.

The increase pushed housing construction to a seasonally adjusted annual rate of 1.697 million units in November after construction starts had dipped 8.4 percent in October.

Although low levels of inflation have allowed the Federal Reserve the wiggle room to keep interest rates very accommodative, there continue to be signs that inflation is creeping up.

Year-to-date, the CPI is running at a still-mild 2.6 percent, while for all of 2001 the index rose a historically tame 1.6 percent. Through November, the core rate is expanding at a 2.1 percent clip.

Last week's statistics on producer prices ruffled feathers on Wall Street for fear companies are losing even more pricing power than before. The figures were particularly worrisome after the Federal Reserve said deflation concerns had entered into its decision to cut interest rates by an aggressive half point in November.

The producer price index fell 0.4 percent in November and was down 0.3 percent minus food and energy.

Retail food prices rose 0.2 percent in November, led by increases for fruit and vegetables.

Energy costs eased 0.2 percent, as fuel oil, electricity, natural gas and gasoline were all cheaper in November than a month earlier.

Within the so-called core rate, a 0.6 percent jump in hospital costs -- a 12-year high -- was offset only partly by cheaper car prices and airfares. Transportation costs as a whole fell 0.1 percent last month after rising 0.6 percent in October when new car models were rolled out.

Housing prices rose 0.2 percent in November after rising 0.3 percent in October.

Tobacco prices, which are another volatile component of the CPI each month, were flat in November.

Meanwhile, U.S. workers saw "real" earnings, which are adjusted for inflation, rise just 0.2 percent in November.

A 0.3 percent rise in earnings was offset by the 0.1 percent increase in the CPI.