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US consumers see flat prices in November, helped by gas

A man pumps gas at a 76 gas station in Los Angeles, California.
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A man pumps gas at a 76 gas station in Los Angeles, California.

U.S. consumer prices were flat in November, but a bounce back in the annual inflation rate from a four-year low will probably give the Federal Reserve cover to start dialing back it massive monetary stimulus.

The Labor Department said on Tuesday its Consumer Price Index was restrained last month by declines in gasoline and natural gas prices, after slipping 0.1 percent in October.

In the 12 months through November, the CPI rose 1.2 percent. It had increased 1.0 percent in October, the smallest advance since October 2009.

Economists polled by Reuters had forecast consumer prices nudging up 0.1 percent last month and increasing 1.3 percent from a year ago.

Stripping out the volatile energy and food components, the so-called core CPI rose 0.2 percent after rising by 0.1 percent for three consecutive months.

That took the increase over the past 12 months to 1.7 percent, rising by the same margin for a third straight month.

The Fed targets 2 percent inflation, although it tracks a gauge that tends to run a bit below the CPI.

Though some Fed officials are concerned about inflation being too low, that will probably not stop the U.S. central bank from reducing the pace of its monthly bond purchases.

Key data including employment, retail sales and industrial production have all pointed to an economy that is on an upswing.

The inflation report was released as Fed officials were due to start a two-day meeting to assess the economy and deliberate on monetary policy.

Persistently low inflation would probably serve as a caution to officials and see the Fed keeping interest rates low for a long time even after it begins to reduce its bond purchases.

A 1.6 percent drop in gasoline prices and 1.8 percent fall in the cost of natural gas offset increases in electricity, keeping inflation subdued last month.

Gasoline prices had dropped 2.9 percent in October, while natural gas prices had declined 1.0 percent. Food prices rose 0.1 percent in November after ticking up 0.1 percent the prior month.

Within the core CPI, apparel prices fell for a third straight month in November, reflecting discounts offered by retailers to lure shoppers and reduce inventory.

In a separate report, the U.S. current account deficit was the smallest in four years in the third quarter as exports increased and more income was earned abroad.

The Commerce Department said the current account gap, which measures the flow of goods, services and investments into and out of the country, narrowed to $94.8 billion.

That was the smallest since the third quarter of 2009 and was an improvement from a revised shortfall of $96.6 billion in the second quarter.

It represented 2.2 percent of gross domestic product, the smallest share since the first quarter of 1998. It was down from 2.3 percent in the July-September period.

Economists polled by Reuters had forecast the current account deficit widening to $100 billion in the third quarter from a previously reported $98.9 billion in the prior period.

The shortfall on the current account has shrunk from a peak of 6.2 percent of GDP in the fourth quarter of 2005, in part because of a significant increase in the volume of oil exports.

In the third quarter, exports of goods and services increased 0.6 percent to $765.1 billion, while imports rose 0.4 percent.

The surplus on income increased to $60.0 billion from $56.0 billion in the second quarter. Net unilateral transfers decreased to $34.1 billion from $34.5 billion.

--By Reuters

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