By Timothy R. Homan Dec. 16 (Bloomberg) -- The cost of living in the U.S. accelerated in November from a month earlier, led by higher prices for energy and medical care. The 0.4 percent increase in the consumer-price index followed a 0.3 percent gain in October, figures from the Labor Department showed today in Washington. The so-called core index that excludes food and energy was unexpectedly unchanged, the first month without an increase since December 2008 and restrained by a drop in shelter costs and cheaper clothing. Energy costs have retreated so far this month, and comments from companies such as Best Buy Co. indicate unemployment close to a 26-year high is prompting retailers to discount their merchandise. Federal Reserve policy makers have said they expect “subdued” inflation in coming months, allowing them to keep interest rates low. The report “gives them some more room to see how the recovery unfolds,” said Harm Bandholz, a U.S. economist at UniCredit Global Research in New York who correctly forecast the core rate. “The drivers are the vast underutilization of capacity, notably the high unemployment rate.” The rise in the consumer price index matched the median forecast of 80 projections in a Bloomberg News survey. Estimates ranged from increases of 0.2 percent to 0.6 percent. The core index was forecast to rise 0.1 percent, according to the Bloomberg survey. Housing Starts Builders in November broke ground on more U.S. homes, a sign the recovery in homebuilding may carry through into 2010. Housing starts rose 8.9 percent to an annual rate of 574,000, the Commerce Department said today in Washington. Stock index futures rose after the reports. Futures on the Standard & Poor’s 500 Index expiring in March added 0.4 percent to 1,108.5 at 8:46 a.m. in New York. Central bankers today will wrap up their final policy meeting of the year with no change in their benchmark lending rate, according to all 98 economists surveyed by Bloomberg. In November, they repeated a pledge to keep the interest rate low for an “extended period.” They also specified for the first time that the policy will stay unchanged as long as inflation expectations are stable and the labor market remains weak. “The bulk of the evidence indicates that resource slack is now substantial,” Fed Chairman Ben S. Bernanke said in a written response to questions from Senator Jim Bunning. His office released Bernanke’s Dec. 14 responses yesterday. “I continue to expect slack resources, together with the stability of inflation expectations, to contribute to the maintenance of low inflation in the period ahead.” Year-Over-Year Compared with a year earlier, consumer prices were up 1.8 percent. Core prices rose 1.7 percent from November 2008, matching the year-over-year gain in October. Fed policy makers’ long-term forecast for their preferred measure of inflation, the Commerce Department index tied to consumer spending and excluding food and fuel, calls for gains in a range of 1.8 percent to 2 percent. That gauge, which is typically lower than the CPI, was up 1.4 percent in the 12 months to October. Energy costs increased 4.1 percent in November, the most since August. Gasoline prices jumped 6.4 percent, accounting for more than 75 percent of the rise in total energy costs, the Labor Department said. Fuel oil costs rose 9 percent, the most since November 2007. The year-over-year declines in the consumer price index are getting smaller as crude oil prices increase from an almost five- year low in December 2008. Oil Prices Crude oil traded on the New York Mercantile Exchange averaged $78.15 a barrel in November, compared with $75.82 in October. Prices have retreated this month, averaging $73.16. Gasoline prices in November averaged $2.65 a gallon, compared with $2.56 a month earlier, according to AAA. Prices for regular-grade gasoline at the pump have averaged $2.63 so far this month. Food costs, which account for about 15 percent of the CPI, increased 0.1 percent in November. Rents, which make up almost 40 percent of the core CPI, fell. Owners-equivalent rent, one of the categories used to track rental prices, decreased 0.1 percent after no change. In September, the measure also dropped 0.1 percent, the first decline since 1992. Medical Care Medical care prices increased 0.3 percent in November, reflecting higher hospital and related services costs. Transportation costs jumped 2.3 percent as prices increased for new vehicles and airline fares. Apparel prices declined 0.3 percent last month after a 0.4 percent decrease. The CPI is the broadest of the three monthly price gauges from the Labor Department because it includes goods and services. A report yesterday showed wholesale prices in November rose 1.8 percent compared with the previous month. The cost of imported goods rose 1.7 percent, the government said last week. Almost 60 percent of the CPI covers prices consumers pay for services ranging from medical visits to airline fares and movie tickets. Jobless Rate The unemployment rate reached 10.2 percent in October before declining to 10 percent last month, the Labor Department said earlier this month. With companies still cutting jobs, companies are having to put more items on sale. Best Buy, the largest electronics retailer, said yesterday that its fourth-quarter gross profit rate will be lower than anticipated because of discounted laptop computers and $299.99 flat-screen TVs to attract customers. The Richfield, Minnesota-based company will see its gross margin decline by as much as 1 percentage point in the fourth quarter, Chief Executive Officer Brian Dunn said on a conference call with analysts. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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