Consumers Catch A Break In October

Consumers were in a spending mood last month. Retail sales were up and now we know why. Prices, especially gasoline prices, were lower last month.

The U.S. Labor Department reports the Consumer Price Index (CPI) actually went down last month by 0.1 percent. Excluding food and energy the "core" index was up a modest 0.1 percent.

There was good news at the gas pump as well as the supermarket checkout counter. Food prices, which had been rising at a brisk pace for most of the year, moderated, helped by a drop in the price for fruits and vegetables.

The improving Japanese supply chain helped create some declines in vehicle prices and except for insurance, housing costs remained under control. The biggest increase in prices was for health care. Those costs had been under control for several months but shot up in October.

"It would be easy to say that this was a good report, and it was, but with oil back above $100 a barrel, I am not optimistic that the pressures on consumers will continue fading," said economist Joel Naroff, of Naroff Economic Advisors, in Holland, Pa.

In fact, gasoline pries stopped their gradual downward trend two weeks ago and appear poised for a rebound. Food costs, which tend to go up when energy costs do, may continue their rise in the coming months. In other words, the October numbers don't necessarily mean inflation is tame.

"Even if you exclude food and energy, it is above desired levels," Naroff said. "Let's enjoy any modest monthly increases that we get but recognize that down the road, costs are likely to rise faster."