US consumer prices shot up an unexpectedly large 1.2 percent last month, the biggest gain in more than 25 years, as hurricanes Katrina and Rita led to the biggest energy-price surge on record, a government report showed on Friday.
But outside of food and energy, prices were tame - rising a scant 0.1 percent for the fifth straight month, the Labour Department said, offering some hope a broad inflation increase could be averted.
A separate government report showed US retail sales rose a lower-than-forecast 0.2 percent last month as car sales tumbled. Outside of autos, however, sales climbed a healthy 1.1 percent, partly reflecting a big gain in gasoline prices.
The increase in the consumer price index - the largest since March 1980 - outstripped Wall Street forecasts for a 0.9 percent gain, but the rise in the so-called core price index came in a touch below the 0.2 percent expected.
Prices for US government bonds gained and the value of the dollar slipped as traders viewed the mild rise in core inflation as likely limiting how far the Federal Reserve will need to push up interest rates to curb inflation. Stock futures also rose, bolstered by signs of consumer resilience.
"Higher energy prices are not providing any big headwinds for the economy and inflation remains very contained," said Chris Rupkey, senior financial economist at Bank of Tokyo/Mitsubishi in New York.
Energy prices leaped 12 percent in September, the biggest advance on records dating to 1957. Gasoline prices, which hit an all-time high in the week after Katrina struck, jumped a record 17.9 percent in September, while natural gas and fuel oil costs each rose more than 12 percent.
Over the past 12 months, energy costs have climbed a steep 34.8 percent, the biggest 12-month gain since the period ending May 1980. Gasoline prices are up more than 50 percent.
The steep rise in energy costs has pushed consumer prices up 4.7 percent over that period, the biggest jump since the 12 months ended June 1991.
While those soaring energy costs have hit household pocketbooks, knocking inflation-adjusted average weekly earnings down 1.2 percent last month according to a separate Labour Department report, the retail sales gain showed consumers were undaunted.
The Commerce Department report showed September purchases held back by a 2.8 percent drop in automotive sales, despite ongoing dealer incentives to boost demand. But the ex-auto sales gain exceeded analysts' expectations.
That rise reflected in part a 4 percent increase in gas station sales. But even excluding motor vehicles and gasoline, sales notched a healthy 0.6 percent advance.
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