US consumer prices edge up, jobless claims fall

US consumer prices rose marginally in September and the number of workers filing new claims for jobless insurance hit a nine-month low last week, more proof the economy was healing after a protracted recession.

Separately, a gauge of manufacturing in New York State jumped unexpectedly this month to its highest in five years on surging new orders, shipments and employment in the sector, a report from the New York Federal Reserve showed.

"This is supportive for a V-shaped recovery. It is also supportive of those who say the stimulus is working. We just have to be patient," said Christopher Low, chief economist at FTN Financial in New York.

In a report that pointed to scant inflation pressures, the Labour Department said last Thursday its Consumer Price Index rose 0.2 per cent last month, matching analysts' expectations, after increasing 0.4 per cent in August.

Initial claims for state unemployment benefits fell 10,000 to a seasonally adjusted 514,000 in the week ended October 10, the department said in another report. Analysts polled by Reuters had forecast new claims rising to 525,000 last week.

US stock index futures pared losses on the data after earlier falling following quarterly results from Goldman Sachs Group and Citigroup Inc. US government bond prices extended losses.

"Overall the inflation picture is encouraging. It looks like deflation pressure is easing and there is no sign of inflation," said Ward McCarthy, chief financial economist at Jefferies and Co. in New York.

He said jobless claims, which have declined for five of the last six weeks, suggested an improvement in the labour market.

Consumer prices are being closely watched for signs of inflation pressures in the wake of massive efforts by the government and the Federal Reserve to stimulate the economy out of a recession that started at the end of 2007.

Economic growth is believed to have resumed in the third quarter, but labour market slack will probably keep price pressures muted for a while and keep deflation on the radar.

Compared to the same period last year, consumer prices dropped 1.3 per cent, with the food index declining from a year earlier for the first time in 40 years.

Consumer prices have been falling on an annual basis since March.

Stripping out volatile energy and food prices, the closely watched core measure of consumer inflation inched up 0.2 per cent from August, a touch above market expectations for a 0.1 per cent gain.

Core prices were lifted by a bounce in new vehicle prices following the expiration of the popular 'cash for clunkers' programme that gave discounts to consumers to trade in their old gas-guzzling cars for new, fuel-efficient ones. New vehicles rose 0.4 per cent after plummeting 1.3 per cent in August.