Record price plunge likely to be short-lived

WASHINGTON — A record drop in energy costs pushed consumer prices down at the fastest pace in 56 years in November. But it won’t last because gasoline prices are rising again and heating costs are expected to soar this winter.

The Labor Department report on Thursday showed the Consumer Price Index fell by 0.6 percent last month, the biggest decline since a 0.9 percent fall in July 1949. It reflected a record 16 percent drop in gasoline prices.

Pump prices had fallen steadily after hitting a record of $3-plus per gallon in early September. But they edged up slightly in the Energy Department’s latest weekly survey; private economists said more increases are expected.

In addition, analysts are forecasting that home heating bills will be significantly higher than last winter, reflecting higher costs for both natural gas and home heating oil.

For November, the underlying or core rate of inflation, which excludes energy and food, rose by 0.2 percent. That matched October’s increase and put both months higher than the 0.1 percent gains recorded for the previous five months.

Analysts said this rise reflected mounting inflationary pressures that probably will worsen as the shock of energy costs spills over into other parts of the economy.

Costs rose in a variety of areas in November, from housing to hotel rooms, and from education to medical care. Analysts noted that even with the huge drop in gasoline prices, they still are 16 percent higher than they were in November 2004.

“Energy costs are off but still high, and everywhere else prices are rising,” said Joel Naroff, chief economist at Naroff Economic Advisors. “Inflation is not out of control, but it is not tame either.”

The Federal Reserve on Tuesday raised interest rates for a 13th time while also indicating that the increases soon may end.

Many analysts believe there will be two more increases of one-quarter of a percentage point in January and March, leaving a benchmark — the federal funds rate — at 4.5 percent.

Nonetheless, Mark Zandi, chief economist at Moody’s Economy.com, said this outlook for interest rates could prove too low if inflationary pressures keep up.

Richard Yamarone, chief economist at Argus Research in New York, noted that companies that make food, home cleaning supplies and other consumer products have announced price increases, which will add to the pressure.

For November, overall energy prices dropped by a record 8 percent. Food prices rose by 0.3 percent for the second straight month.

Through the first 11 months of this year, inflation at the consumer level has risen at an annual rate of 3.8 percent, compared with an increase for all of 2004 of 3.3 percent. The acceleration has come from energy prices, climbing at a rate of 21.7 percent this year compared with 16.6 percent last year.