Lucky Americans: Gas Prices Are Falling And Falling

Current gas prices are shown at a Shell gas station in Encinitas, California October 10, 2014. REUTERS/Mike BlakeThomson ReutersCurrent gas prices are shown at a Shell gas station in Encinitas, California

In September, gasoline prices slipping 1.0 per cent after dropping 4.1 per cent in August.

The current situation with gas prices stands in vivid contrast with the worst years of the Great Recession, when gas prices spiked, putting the crunch on motorists.

Lower gas prices have been a boon for U.S. automakers. The Detroit Big Three — General Motors, Ford, and Chrysler — have been able to build and sell more highly profitable trucks and SUVs as the market has recovered.

Falling gas prices have enabled consumers to once again flock to vehicles with weaker fuel economy, after turning to small cars and hybrids in the 2009-2010 period. That might sound like a looming problem, if gas prices rise again. However, carmakers have raised the overall fuel efficiency of the trucks and SUVs, due largely to federal regulatory requirements.

Other consumer prices in the U.S. rose marginally in September, painting a weak inflation picture that should give the Federal Reserve ample room to keep interest rates low for a while.

The Labour Department said on Wednesday its Consumer Price Index edged up 0.1 per cent last month after declining 0.2 per cent in August. Economists polled by Reuters had forecast consumer prices being flat in September.

The CPI increased 1.7 per cent in the 12 months through September after a similar rise in August. The CPI-W index, which is used to make adjustments for Social Security payments rose 1.7 per cent in the third quarter from the year earlier.

Inflation has waned in recent months after quickening in the second quarter, in part as a strengthening dollar and slower economic growth in China and the euro zone dampen imported price pressures.

Chevy CruzeChevroletThe Chevy Cruze was popular when gas was more expensive.

Weak inflation and a recent global equities market sell-off could see the U.S. central bank in no rush to start raising its benchmark overnight interest rate, which it has kept near zero since December 2008.

Financial markets now expect the first interest rate hike in the fourth quarter of 2015 instead of the second quarter.

Stripping out food and energy prices, the so-called core CPI ticked up 0.1 per cent last month after being unchanged in August. In the 12 months through September, the core CPI rose 1.7 per cent after advancing by the same margin in August.

The Fed targets 2 per cent inflation and it tracks an index that is running even lower than the CPI.

Food prices gained 0.3 per cent after rising 0.2 per cent in August.

Within the core CPI, shelter costs increased 0.3 per cent in September after rising 0.2 per cent in August. The shelter index was up 3.0 per cent in the 12 months through September, the largest gain since January 2008.

Airline fares declined for a third straight month, while prices for new motor vehicles and apparel were unchanged.

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