Consumer inflation surged by the largest amount in more than two years in November, led by gasoline prices. The cost of clothing, airline tickets and prescription drugs also jumped.
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.
Former Federal Reserve Chairman Alan Greenspan told National Public Radio in an interview broadcast Friday that the odds of a recession are “clearly rising” with economic growth “getting close to stall speed.”
Many economists believe that economic growth in the current October-December quarter could fall below 1 percent at an annual rate, sharply below the 4.9 percent rate of growth in the third quarter.
The Federal Reserve, trying to ward off an outright recession, cut a key interest rate this week for the third time this year. The Fed also announced a coordinated response with central banks around the world to pump more money into the banking system to combat a severe credit squeeze which has made it harder for consumers and businesses to get loans.
Energy costs were up 5.7 percent in November, with gasoline prices rising by 9.3 percent, the biggest increase since May. Gasoline prices have been pushed higher by a renewed surge in global energy costs that pushed crude oil prices close to $100 per barrel last month.
Food costs were 0.3 percent in November, led higher by big increases in fruit and vegetable prices.
Outside of food and energy, clothing prices, which have been falling most of this year, surged by 0.8 percent, the biggest rise since April 1999.
Airline tickets were up 2.6 percent, representing the price hikes imposed by airlines because of their own rising fuel bills.
The cost of medical care, one of the leading areas for price gains, was up 0.4 percent last month, led by a 0.8 percent jump in prescription drug costs.