Thursday, 17 Feb 2011 08:43 AM
Consumers paid more in January for everything from food and
gas to airline tickets and clothing. The price increases reflect
creeping but still-modest inflation.
The Consumer Price Index rose 0.4 percent last month, matching
December's increase, the Labor Department said Thursday. In the
past year, the index has risen 1.6 percent.
Excluding volatile food and energy costs, the core index rose
0.2 percent. That's the largest increase in more than a year.
Core prices increased 1 percent over the past 12 months. That's
higher than December's 0.8 percent annual pace, but well below
the Federal Reserve's preferred range of closer to 2 percent.
Food prices increased 0.5 percent in January, the most in more
than two years. Gas prices rose 3.5 percent.
Other reports Thursday showed:
• More people are applying for unemployment benefits.
Applications rose last week to a seasonally adjusted 410,000,
the Labor Department said. That follows a week when they fell to
their lowest level in three years, although the decline was
partly because snowstorms closed some government offices and
kept people from applying.
• Fewer homeowners are falling behind on their mortgages. The
Mortgage Bankers Association said 8.2 percent of homeowners
missed at least one mortgage payment in the October-December
quarter. That's down from 9.1 percent in the previous quarter
and a high of more than 10 percent in the January-March quarter.
But foreclosures are still on the rise.
• The average rate on a 30-year fixed mortgage dipped to 5
percent this week from 5.05 percent, according to Freddie Mac.
The average rate had reached a 40-year low of 4.17 percent in
November.
• A private research group's gauge of future economic activity
rose a slim 0.1 percent in January, much less than in recent
months. The rise in the Conference Board's index of leading
economic indicators was the seventh consecutive monthly advance.
The report on consumer prices shows that some companies are
seeking to pass on higher prices for oil, cotton, and other
commodities. In January, a measure of wholesale inflation rose
at the fastest pace in more than two years.
But high unemployment and weak wage increases are limiting
retailers from hiking up prices.
"With the unemployment rate still at 9 percent, there will be
plenty of downward pressure on underlying prices and so we don't
expect core inflation to trend upwards," Paul Ashworth, an
economist at Capital Economics, said.
Federal Reserve officials unanimously concluded late last month
that inflation wasn't yet a problem, according to minutes
released Wednesday of a Jan. 25-26 meeting. The central bank
anticipates inflation won't exceed 1.7 percent this year.
Still, many prices are starting to rise.
The cost of clothing climbed 1 percent in January, as companies
sought to offset the rising price of cotton.
Airline fares increased for the fifth month in a row, rising 2.2
percent. Airlines, which are paying about 50 percent more for
fuel than they did a year ago, have raised fares or fuel
surcharges on leisure travelers five times since December.
The cost of housing, which makes up about 40 percent of the core
index, rose 0.1 percent, reflecting increases in rents.
Some goods and services are getting cheaper. New and used car
prices fell. Hotel prices dropped 1 percent. Computer and
technology equipment costs fell 0.8 percent.
Increasing prices for commodities are pushing up costs for
businesses, and some are responding by raising their prices. But
the impact hasn't broadly affected consumers yet.
Economists expect consumer prices, outside of food and energy,
to tick up this year as more companies pass on their rising
costs.
And many food companies are raising prices in response to higher
costs for corn, wheat and other grains. Corn prices have doubled
in the past six months.
Bad weather has damaged harvests in many countries around the
world. At the same time, rapid growth in developing countries is
raising demand for a range of commodities, pushing up prices.
Unemployment fell in January to 9 percent, following the fastest
two-month drop in a half-century. But the rate is still very
high and economists expect it will stay near the current level
for most of the year.
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