US inflation down on cheaper fuel

Fuel costs have risen this month

US inflation fell slightly in August, dipping by 0.1% after a sharp drop in energy prices, officials figures show.

However, core US consumer prices, which excludes food and energy costs, rose by 0.2%, in line with market expectations.

Separate data showed the number of new US homes being built sank to the lowest annual rate for 12 years, while permits for new construction also dipped.

The data came a day after US interest rates were cut from 5.25% to 4.75%, a larger cut than most had predicted.

In making its rate cut decision, the Fed acknowledged that inflationary pressures remained, but said it needed to avert an economic downturn prompted by woes in the housing market.

Housing slowdown

Analysts said that Wednesday's data suggested the Fed's decision had been the right one as it showed that the housing market had weakened while inflation had stayed under control.

Energy costs have now fallen for three straight months, however bills have risen in September with oil prices hitting new records.

The Labor Department figures showed that clothing prices fell 0.5% and the volatile hotel component dropped back 0.6%.

In separate data from the Commerce Department, the number of new US homes being built fell 2.6% last month to an annual pace of 1.331 million units, the lowest rate for 12 years.

Building permit requests - seen as an indicator of future construction plans - hit a low not seen since mid-1995.