* U.S. Oct consumer prices down 0.1 pct on gasoline, cars
* Core prices up 0.1 pct
* Industrial output rises 0.7 pct, largest gain since July
By Jason Lange
WASHINGTON, Nov 16 U.S. consumer prices fell in
October for the first time in four months, taking pressure off
strapped households and giving the Federal Reserve more room to
ease monetary policy if the economy falters.
But for now, growth is gaining traction and a separate
report on Wednesday showed industrial output rebounded strongly
last month as factories and mines ramped up production.
"The consistent theme in the recent flow of economic data
has been one of accelerating momentum in economic activity,"
said Millan Mulraine, a senior macro strategist at TD
Securities in New York.
"Nevertheless, the concern for the recovery continues to be
about what happens in Europe, as any escalation in the
unfolding debt crisis could present a significant obstacle for
the economic recovery."
The Labor Department said consumer prices dropped 0.1
percent last month, which was roughly in line with
expectations, as Americans paid less for new cars and
The data reinforces the view that inflation is poised to
trend lower following a spike in oil prices earlier in the
year. That is seen giving the Fed more room to act if the
"The Fed remains intently focused on employment and growth
-- and not on inflation," said Jacob Oubina, an economist at
RBC Capital Markets in New York.
A separate report from the Fed showed industrial production
rebounded 0.7 percent last month after slipping 0.1 percent in
September. October's increase was the largest since July.
Economists had expected industrial production to rise 0.4
percent last month.
Manufacturing expanded 0.5 percent after rising 0.3 percent
in September. The gain reflected a 3.1 percent jump in the
production of motor vehicles and parts.
Mining output surged 2.3 percent, more than reversing
September's 0.5 percent drop. Utilities fell 0.1 percent,
declining for a third straight month.
The report showed little sign of inflation, even though
capacity utilization last month rose to its highest level since
The drop in prices in October also will be a relief to
workers whose wages have failed to keep up with inflation in
A separate report by the Labor Department showed
inflation-adjusted weekly earnings rose 0.3 percent in
Major U.S. stock indexes were lower on worries about Europe
debt problems. The dollar extended gains against the euro after
the inflation data was published, while U.S. Treasuries were
steady at higher levels.
Economists had expected the Consumer Price Index would be
flat last month after rising 0.3 percent in September.
The economy has been gaining steam since the summer, but
Europe's worsening sovereign debt crisis threatens to throw the
U.S. economy back into recession.
"The data is relatively upbeat in the U.S., which contrasts
with the situation in Europe," said Omer Esiner, a strategist
at Commonwealth Foreign Exchange in Washington.
Also looming over the economy, the U.S. Congress could let
tax cuts and some unemployment benefits expire at the end of
year, which would drag on growth.
Investors and economists generally expect 12-month
inflation will fall sharply over the next year, and the Federal
Reserve has said it also expects inflation will cool.
The Fed cut overnight interest rates to near zero almost
three years ago and has bought $2.3 trillion in bonds to
further spur growth. It recently said it was likely to hold
rates near rock-bottom levels through at least mid-2013.
Food prices rose 0.1 percent in October, while gasoline
fell 3.1 percent.
Outside food and energy, prices climbed 0.1 percent in
October, the same pace registered in September. The so-called
core index rose because higher prices on non-energy services
and for apparel outweighed a 0.3 percent decline in new vehicle
prices. Shelter costs rose 0.2 percent, while apparel increased
In the 12 months through October, consumer prices rose 3.5
percent after rising 3.9 percent in the full year through
Core prices rose 2.1 percent in the 12 months through
October, up from 2.0 percent in September.