US inflation rate near zero

Retired people will not see social security benefits increase next year as the national inflation rate remains near zero.

Walter Mack, a 76-year-old Chapel Hill resident, said he and his wife are cutting costs to keep up with rising prices for health insurance, electricity and gasoline.

The consumer price index rose 0.1 percent in September, compared to 0.3 percent increases in July and August, according to the Bureau of Labor Statistics’ Friday press release.

“We’re supposedly in a non-inflationary period, but I would beg to differ,” Mack said.

In response to the lack of inflation, the Social Security Administration announced Friday there will be no cost of living adjustment for people receiving social security benefits in 2011.

Retirees have not received a cost of living adjustment since a 5.8 percent increase in 2009.

Since last September, the overall consumer price index, which measures the cost of commonly needed items, has risen 1.1 percent, due to a slight increase in food and gasoline costs.

When the prices of food and energy were removed, the so-called “core” index remained the same since July.

UNC economics professor Patrick Conway said the inflation numbers did not surprise him.

“Inflation rises when the economy is overheated and there is excess demand,” he said. “With unemployment up and demand low, I was expecting prices to be fairly constant.”

If prices sink further, the nation risks experiencing deflation, Conway said. Deflation benefits people living on fixed incomes, but harms borrowers and discourages spending.

But Conway said he expects to see prices rise slightly next month as winter begins and demand for heating rises significantly in the north.

Over the past year, core inflation has risen only 0.8 percent, compared to the government’s target rate of 1.5 to 2 percent.

But Conway said not many people are hurting at this point.

“Retirees will tell you they’re losing because they’ve gotten used to getting a cost of living adjustment,” Conway said. “From an economics standpoint, that’s a wash. They should be just as well off.”

Mack said he and his wife are trying to save money by using less electricity in response to rising energy costs.

“We watch electricity — I turn the lights on and she turns them off,” Mack said. “I’ve got to be more mindful of that.”

The Macks said their efforts have helped them get by in spite of not receiving an increase in benefits.

“I would say that many seniors are not as fortunate,” Mack said. “They are hurting financially.”

Contact the City Editor at citydesk@unc.edu.