Energy prices drove consumer prices higher for a second month in February and at the fastest pace in seven months, the Labor Department said Wednesday. About two-thirds of the increases resulted from a jump in gasoline pump prices. And with that, the annual U.S. inflation rate climbed to 0.2% after the 0% reading reported in January.
The Consumer Price Index (CPI) increased 0.4% in February — the biggest one-month jump since July — and follows the 0.3% rise in January that economists were again expecting. The extra bump helps dispel some fears of chronic price declines, known as deflation, which can have a devastating impact on the economy and employment.
"Worries about deflation can be set aside right now," Bernard Baumohl, managing director of the Economic Outlook Group, was quoted on NYTimes.com. "It’s unlikely we would have seen inflation drop to negative levels for more than a year, given all the fiscal and monetary stimulus that’s in the economy. The math just didn’t work out."
The CPI is the key government gauge for inflation. The core CPI, which excludes volatile food and energy prices, is even more closely watched. It increased by 0.2% for the second month in a row. The core CPI is up 1.8% over the past year. That is right within the Federal Reserve’s favored 1%-2% range.
"It brings some relief to the Fed, they are exactly in the middle of their comfort zone," Harm Bandholz, a U.S. economist at UniCredit Research in New York who correctly forecast the rise in the core rate, was quoted on Bloomberg.
In the 12 months ending in January, core prices had risen 1.7% to mark the lowest rise in nearly five years.
Consumer price details
Rising February prices include:
- Energy prices jumped 3.3%, with gasoline surging 8.3% after a 6.0 percent increase
- Medical care was up 0.3%, with prescription drugs rising 0.6%
- Clothing prices surged 1.3%, the biggest increase in nearly 20 years
- Transportation increased 1.9%, although it was down 11% over the past year
- New vehicles prices rose 0.8%,
- Education and communication prices climbed 0.2%
- Tobacco and smoking products rose 0.7%
Declining February prices include:
- Food prices fell 0.1% after rising 0.1 percent in January
- The food at home index fell 0.4 percent with five of the six major grocery store food group indexes posting declines in February.
- Used car and truck prices fell 1.7%
- Airfares declined 2.6%
Housing prices, which accounts for about 40% of the CPI index, were unchanged for the third straight month.
In a separate report Tuesday, the Labor Department said the Producer Price Index rose 0.1% in February. A companion-like report to the CPI, the PPI measures prices at the factory door and inflation pressures before they reach the consumer.