U.S. consumer prices rose a brisk 0.3 percent in October, driven by the sharpest rise in energy costs in five months, while jobless claims were higher than anticipated, government reports showed on Thursday.
The Consumer Price Index, the most broadly used gauge of inflation, rose at the same rate as in September, which was the steepest rise since a 0.7 jump in May, according to the Labor Department report.
But core prices, which strip out volatile energy and food costs, rose a more modest 0.2 percent in October, also in line with expectations. Both the overall and core inflation readings were directly in line with expectations.
U.S. government bonds were steady as the data was in line with forecasts and the dollar showed little reaction.
"It shows that there's still growth, slow growth, but still growth, and as long as inflation stays within consensus I think that it's a net positive for the market," said Marc Pado, a U.S. market strategist at Cantor Fitzgerald in San Francisco.
At the same time, markets boosted chances that the Federal Reserve will cut rates at its December meeting to 90 percent from 72 percent late on Wednesday.
Consumer prices were 3.5 percent higher than a year ago, the biggest 12-month increase since August 2006, when they rose 3.8 percent, a Labor Department official said. Core prices were up 2.2 percent on a year-on-year basis.
So far this year, prices have climbed by a seasonally adjusted annual rate of 3.6 percent, driven by higher food and energy costs. That compares with a 2.5 percent gain in all of 2006.
Energy costs have surged at a 12.3 percent annual rate this year, more than four times higher than the 2.9 percent gain in all of last year. Food prices increased at a 5.5 percent annual rate in 2007, compared with a 2.1 percent rise in 2006.
Jobless Claims Rise
A separate Labor Department report showed new applications for U.S. jobless aid rose more than expected to a seasonally adjusted 339,000 last week, and the more-reliable four-week moving average held steady at a 6-month high.
Initial claims for state unemployment insurance benefits rose by 20,000 from an upwardly adjusted 319,000. Added to that weakening labor picture, was a report showing softening in the New York area manufacturing sector.
A report from the New York Federal Reserve's showed manufacturing sector growth in New York state slowed in November, with new orders and inventory activity weakening and a big spike in material costs.
Still, the 27.37 reading on that New York Fed's "Empire State" general business conditions index, one of the earliest monthly snapshots of U.S. factory conditions, was higher than Wall Street economists had expected.