Flooring News and Information

Washington, DC, Dec. 14—The continuing fall in energy prices left inflation at the consumer level flat during November, despite the biggest increase in the cost of new cars in more than a decade, according to government figures.

According to the Labor Department, its Consumer Price Index showed no increase last month after having fallen by 0.3% in October as America's first recession in a decade continued to hold down inflation.

So far this year, inflation at the consumer level is rising at an annual rate of just 1.9%, reflecting the dampening effect of a recession, with thousands of layoffs acting to hold down wage demands and various retailers cutting prices to entice consumers to keep spending during hard times. The 1.9% inflation rate this year compares to inflation increases of 2.7% in 1999 and 3.4% last year, which had been the worst performance in nine years.

In both of those years, energy costs shot up at double digit rates. Energy costs so far this year are falling at a 11.1% rate as oil producing countries have battled against a global glut of oil, reflecting the onset of what many fear is a worldwide recession.

In another reflection of how the recession was dampening economic activity, the Commerce Department reportedly that businesses cut their inventories by 1.4% in October following a 0.6% reduction in September.

Businesses have been struggling to reduce their backlog of unsold goods as the recession has dampened demand for their products. Analysts believe that all of these reductions are setting the stage for a return of economic growth next year if demand picks up as expected.

The CPI report showed that energy prices dropped by 4.4% after falling by an even bigger 6.3% in October. Gasoline pump prices were down 10.1% while home heating oil costs and the price of electricity in the home also declined.

Only natural gas showed an increase last month, rising by 2.6%, but analysts said even with this gain natural gas prices remain far below the high levels hit last winter during a period of gas shortages in many parts of the country. Food costs were also down last month, declining 0.1% as the cost of pork, vegetables and poultry all declined.

Outside of the volatile food and energy areas, the core rate of inflation took a big jump in November, rising by 0.4% after four straight months of more modest 0.2% gains. In fact, the November increase was the biggest since a similar 0.4% rise in January of 1996.

However, analysts noted that much of the cost pressures came in two areas, a huge 3.9% jump in tobacco prices and a 0.6% rise in new car costs, which was the biggest gain for autos since January 1991. Analysts said the big jump in car prices reflected a comeback after steep discounting was put in place in October as dealers struggled to lure customers back into showrooms following the terrorist attacks.