Economy Watch: CPI Drops for First Time in Six Months

By Dees Stribling, Contributing Editor

The Bureau of Labor Statistics reported on Friday that the U.S. Consumer Price Index declined 0.3 percent in November compared with October, the first time since May that the all-price index has edged down. But the movement probably doesn’t indicate deflation—over the last 12 months, the all-items index was up 1.8 percent.

In fact, most of the drop was due to the fact that gas prices have been dropping lately. The BLS gasoline index fell 7.4 percent in November, which more than offset increases in other prices, resulting in the decline in the all-items index for November. The AAA Daily Fuel Gauge says that the average price for a gallon of unleaded was $3.257 on Sunday, compared with $3.43 a month ago. A year ago, the average price was $3.25 a gallon, so gas has essentially retreated from its temporary 2012 highs, which temporarily posed a strain on consumer budgets.

Take food and energy out of the CPI, and prices increased 0.1 percent in November after a 0.2 percent increase in October. The index for all items less food and energy rose 1.9 percent over the last 12 months, or slightly lower than the October figure of 2 percent, and remarkably in line with the stated inflation goal of the Federal Reserve. The food index has risen 1.8 percent over the last 12 months, while the energy index has risen 0.3 percent.

Industrial production recovers from Sandy

U.S. industrial production increased 1.1 percent in November after falling 0.7 percent in October, according to the Federal Reserve on Friday. Production was down in October 1 percent compared with the previous month, mostly a reflection of the impact of industries in the Northeast that were temporarily walloped by Hurricane Sandy.

The gain in November was not only because of the bounce back from Sandy, however. In addition to that, the Fed said, a sizable rise in the production of motor vehicles and parts boosted factory output in November. Also, the output of utilities advanced 1 percent, and production at mines rose 0.8 percent.

At 97.5 percent of its 2007 average, total U.S. industrial production in November was 2.5 percent above the same month in 2011 level. Capacity utilization for total industry increased 0.7 percentage point to 78.4 percent, a rate 1.9 percentage points below its long-run (1972-2011) average.

Fewer banks closed this year than last

The Community Bank of the Ozarks in Sunrise Beach, Mo., was closed on Friday, with the FDIC becoming its receiver, and the Bank of Sullivan in Sullivan, Mo., assuming all its deposits. An ordinary Friday closure for the FDIC, but it marks the 51st U.S. bank to close this year, and probably one of the last. The total is another indicator of improvement in the banking sector. In 2011, 92 banks failed, while in 2010, the total was 157.

Wall Street had a mildly down day on Friday, with the Dow Jones Industrial Average dropping 35.71 points, or 0.27 percent, while the S&P 500 lost 0.41 percent and the Nasdaq declined 0.7 percent.