WASHINGTON • American consumer prices recorded their biggest increase in eight months in September as petrol prices soared in the wake of hurricane-related production disruptions at oil refineries in the Gulf Coast area, but underlying inflation remained muted.
The mixed report from the US Labour Department yesterday comes as Federal Reserve officials have been engaged in a vigorous debate on the inflation path and suggests a December interest rate increase is not a done deal.
Policymakers could, however, find solace from another report indicating that the US economy was swiftly recovering from the damage inflicted by Hurricanes Harvey and Irma, with a strong rebound in retail sales last month.
"The firmness in retail sales should override the enduring mystery of low inflation to spur a December Fed rate hike," said BMO Capital Markets senior economist Sal Guatieri in Toronto.
The Labour Department said its consumer price index (CPI) rose 0.5 per cent last month after advancing 0.4 per cent in August.
September's rise was the biggest since January and pushed up the year-on-year CPI gain to 2.2 per cent from 1.9 per cent in August.
The increase in the CPI was broadly in line with the expectations of economists.
Petrol prices surged 13.1 per cent last month, accounting for 75 per cent of the rise in the CPI. The increase in petrol prices was the largest since June 2009 and followed a 6.3 per cent advance in August.
But beyond petrol, price pressures were benign.
Excluding the volatile food and energy components, consumer prices gained 0.1 per cent in September as the increase in rental accommodation slowed and the cost of new motor vehicles and medical care declined. The so-called core CPI rose 0.2 per cent in August.
In a separate report, the Commerce Department said retail sales jumped 1.6 per cent in September.
Retail sales were also buoyed by a surge in receipts at service stations, which reflected higher petrol prices. Last month's increase in retail sales was the largest since March 2015.
Excluding automobiles, petrol, building materials and food services, retail sales increased 0.4 per cent last month after being unchanged in August.
These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product (GDP).
The rebound in core retail sales suggests the drag on the United States economy from the recent hurricanes will probably be modest.
Economists estimate the storms could subtract at least six-tenths of a percentage point from third-quarter GDP growth.
The US economy grew at a 3.1 per cent annualised rate in the April-June period.