After the housing slump, inflation

December 18, 2007 - 0:0

WASHINGTON (AP) -- Led by higher gasoline prices, consumer inflation in the United States shot up in November by the largest amount in more than two years.

An Amish buggy trots past unaffected by rising U.S. fuel prices which have led consumer inflation.
In a troubling juxtaposition, the rise in inflation is coming at a time when economic growth is slowing sharply under the weight of a steep slump in housing and a severe credit crunch.
""We are in store for a period of very weak if not recessionary growth and uncomfortably high inflation,"" said Mark Zandi, chief economist at Moody's Economy.com. ""People are going to get hit with both a weaker job market and having to pay more to fill their gas tanks and buy groceries.""
There were also big increases in the cost of clothing, airline tickets and prescription drugs.
The Labor Department said its closely watched Consumer Price Index rose 0.8 percent last month, the biggest one-month increase since a 1.2 percent surge in September 2005, when the country was hit by rising energy costs in the wake of Hurricane Katrina.
Core inflation, which excludes volatile energy and food prices, also accelerated in November, rising by 0.3 percent, the biggest increase in 10 months.
The 0.8 percent rise in consumer prices was worse than the 0.6 percent advance that economists had expected. With one month to go, inflation in 2007 is rising at an annual rate of 4.2 percent, far above the 2.5 percent increase in 2006.
The surge in inflation adds another risk to an economy that is already struggling under the weight of a meltdown in housing, a severe credit crunch and faltering consumer confidence.
The worry is that the jump in energy costs will leave consumers with less money to spend on other items, worsening the slowdown in economic growth that is already happening.