US consumer prices shot up an unexpectedly large 1.2 per cent last month in what was the biggest gain in more than 25 years, a government report showed today.
Hurricanes Katrina and Rita led to energy prices leaping 12 per cent in September, the biggest advance on records dating to 1957, the Labor Department said.
The steep rise in energy costs pushed consumer price inflation up to 4.7 per cent for the period, the biggest jump since the 12 months ended June 1991.
Petrol prices, which hit an all-time high in the week after Katrina struck, jumped a record 17.9 per cent in September, while natural gas and fuel oil costs each rose more than 12 per cent.
Over the past 12 months, energy costs have climbed a steep 34.8 per cent, the biggest 12-month gain since the period ending May 1980. Petrol prices are up more than 50 per cent.
The increase in the consumer price index - the largest since March 1980 - outstripped Wall Street forecasts for a 0.9 per cent gain, but the rise in the so-called core price index came in a touch below the 0.2 per cent expected.
But outside of food and energy, prices were tame - rising a scant 0.1 per cent for the fifth straight month, the Labor Department said, offering some hope a broad inflation increase could be averted.
A separate government report showed US retail sales rose a lower-than-forecast 0.2 per cent last month as car sales tumbled. Outside of cars, however, sales climbed a healthy 1.1 per cent, partly reflecting a big gain in gasoline prices.
Prices for US government bonds gained, and the value of the dollar slipped as traders viewed the mild rise in core inflation as likely limiting how far the Federal Reserve will need to push up interest rates to curb inflation.
Stock futures also rose, bolstered by signs of consumer resilience. "Higher energy prices are not providing any big headwinds for the economy and inflation remains very contained," said Chris Rupkey, senior financial economist at Bank of Tokyo/Mitsubishi in New York.
While those soaring energy costs have hit household pocketbooks, knocking inflation-adjusted average weekly earnings down 1.2 per cent last month, the retail sales gain showed consumers were undaunted.
The Commerce Department report showed September purchases held back by a 2.8 per cent drop in automotive sales, despite ongoing dealer incentives to boost demand.