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Consumer Inflation Tame
The Labor Department reported that consumer prices grew a
modest 0.2% in January, while prices, excluding food and
energy, actually fell for the first time in more than a
quarter of a century. Core consumer prices dipped 0.1%, the
first decline since December 1982. The results suggest that
inflation is not a problem and should ease concerns that the
Federal Reserve might raise the federal funds rate, after
hiking the discount rate on February 18. The rise in overall
prices reflected a 2.8% jump in energy costs, which included
a 4.4% jump in gasoline pump prices and a 3.5% increase in
the cost of natural gas. Food prices rose a modest 0.2%. The
price of airline tickets fell 2.5%, car prices dropped 0.5%
and clothing costs fell 0.1%. High unemployment and stagnant
wages have pinched consumer spending, which means businesses
don’t have the power to lift prices.
Meanwhile, big increases in energy costs pushed wholesale
prices up considerably in January. The Labor Department
reported that wholesale prices grew 1.4% last month.
However, core inflation at the wholesale level, which
excludes energy and food, grew a tamer 0.3% in January. Over
the past 12 months, core prices at the wholesale level are
up a moderate 1%. Over the past year, total wholesale prices
are up 4.6%, the largest 12-month increase since a 5.2% jump
in the 12 months ending in October 2008. But the price
pressures are coming mainly from big gains in the cost of
energy. Energy prices rose 5.1% in January, the biggest gain
since a 5.6% jump in November. The January increase was led
by an 11.5% advance in gasoline prices and a 16.2% surge in
the cost of home heating oil. Food prices increased 0.4% in
January following a 1.3% gain in December.
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Date Last Updated: 03/01/2010
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