Consumer Prices in U.S. Rose in February As Gasoline Jumped

Consumer Prices in U.S. Rose in February as Gasoline Jumped (Bloomberg, Mar 16, 2012):

The cost of living in the U.S. rose in February by the most in 10 months, reflecting a jump in gasoline that failed to spread to other goods and services.

The consumer-price index climbed 0.4 percent, matching the median forecast of economists surveyed by Bloomberg News, after increasing 0.2 percent the prior month, the Labor Department reported today in Washington. The so-called core measure, which excludes more volatile food and energy costs, climbed 0.1 percent, less than projected.

The biggest jump in gasoline in more than a year accounted for about 80 percent of the increase in prices last month, leaving households with less money to spend on other goods and services. Federal Reserve policy makers say the advance in fuel costs will be temporary, and most see little risk inflation will flare out of control as unemployment exceeds 8 percent.

“There are some worries from the energy prices perspective, but the Fed and most people realize that the increase will probably be transitory,” said Benjamin Reitzes , an economist at BMO Capital Markets in Toronto. “Outside of energy prices, there is not much risk for the consumer.”

Stock-index futures held earlier gains after the report. The contract on the Standard & Poor’s 500 Index maturing in June rose 0.2 percent to 1,399.3 at 8:31 a.m. in New York. Treasury securities trimmed losses,, with the yield on the benchmark 10- year note at 2.32 percent, down from a high of 2.35 percent in the minutes before the data was released.

Survey Results

Estimates of the 80 economists surveyed ranged from increases of 0.2 percent to 0.6 percent.

Consumer prices increased 2.9 percent in the 12 months ended in February, the same as in January.

The gain in the core gauge followed a 0.2 percent increase in January and was smaller than the 0.2 percent gain median forecast of economists surveyed. They were up 2.2 percent for the last 12 months, compared with 2.3 percent for the 12 months ended in January.

Today’s report showed energy costs increased 3.2 percent from a month earlier. Gasoline jumped 6 percent, the most since December 2010.

Escalating oil prices has pushed up the cost of the fuel. Regular gasoline in February averaged $3.56 a gallon, or 18 cents more than January, according to AAA, the nation’s biggest auto group. It was the highest monthly average since September.

The cost has kept climbing, reaching $3.82 on March 14, the highest in 10 months.

Fed’s View

The Fed, nonetheless, said it anticipates that the pressure on consumer prices from energy will wane later in the year.

“Inflation has been subdued in recent months although prices of crude oil and gasoline have increased lately,” the Federal Open Market Committee said in a statement following a March 13 meeting. Oil will “push up inflation temporarily, but the committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate” of stable prices and maximum employment.

The central bank’s preferred inflation gauge, the measure calculated by the Commerce Department and tied to consumer spending, rose at a 1.2 percent annual rate in the fourth quarter. Fed officials have set an explicit inflation goal of 2 percent.

Today’s report showed food costs were little changed, the least since July 2010.

Clothing Less Expensive

The increase in the core measure reflected higher prices for new cars and hotel stays. Clothing costs dropped by the most since July 2006, and used-cars were also cheaper last month.

“We feel like inflation will moderate,” Charles Holley, chief financial officer at Wal-Mart Stores Inc. (WMT), said during a March 7 investor conference. “The one wildcard, though, is going to be gas prices. If oil continues to go up, I think that could be a drag on economies around the world.”

Paychecks are failing to keep up with even limited inflation, another Labor Department report today showed. Hourly earnings adjusted for prices dropped 0.3% in February, and were down 1.1 percent over the past 12 months, today’s report showed.

A Labor Department report yesterday showed prices paid to producers rose 0.4 percent in February, paced by the gain in energy expenses. Import prices, reported March 14, also climbed 0.4 percent.

The CPI is the broadest of the three monthly price measures from the Labor Department because it includes goods and services. About 60 percent of the CPI covers prices consumers pay for services ranging from medical visits to airline fares and movie tickets.

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