The Consumer Price Index surged 1.2 percent in September, the biggest one month jump in 25 years, as soaring gasoline prices took a heavy toll on consumer pocketbooks. But economists say the numbers don?t exactly mean inflation has come roaring back.
Why not? Because the Labor Department, when compiling the index, makes a distinction between the prices of food and energy -- which can fluctuate wildly month to month -- and the price of everything else.
When you strip out the cost of energy from Septembers numbers, everything else went up a modest .01 percent.
"Yes, energy costs are about to leave the solar system, but where is all the other inflation? The Bureau of Labor Statistics has yet to spot it, if it exists," said Joel Naroff, a Philadelphia-based private economist.
So far, businesses have not begun to pass their higher energy costs along to consumers. When that happens, consumers will see prices go up for goods and services across a wide spectrum. Naroff says there were some signs last month that some prices are going up, but overall nothing that would set off alarm bells.
"Education, and communication prices jumped quite sharply. Food and recreation costs were up moderately, but clothing prices fell," he said.
Of course, consumers don't get to "strip out" energy and food costs from their family budgets each month, so even a one month surge can take a heavy toll, especially when it was a month like September 2005, which delivered body blows in the form of two Gulf Coast hurricanes. The prices consumers paid for gasoline and other energy surged over 12 percent for the month.
Interest rates will probably also go higher in the months to come. The Federal Reserve has been following a consist policy of boosting rates this year, and while Naroff says there's nothing in the report to stoke inflation fears, there's nothing there to make the Fed back off, either.
"Will we see those stories of purported price hikes turn into real numbers? That is likely to be the case and the Fed's Open Market Committee, which sets rates, is a forward-looking group," he said.
