WASHINGTON (March 18) - Consumer prices rose in February by the
largest amount in seven months as gasoline prices surged again and
clothing costs jumped the most in nearly two decades.
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Despite the February blip, the recession was expected to dampen
any inflation pressures for at least the rest of this year.
The Labor Department reported Wednesday that consumer inflation
rose 0.4 percent in February, the biggest one-month jump since a
0.7 percent rise in July. Two-thirds of last month's increase,
which was slightly more than analysts expected, reflected a big
jump in gasoline pump prices.
Core inflation, which excludes food and energy, rose 0.2 percent
in February, also slightly higher than the 0.1 percent rise
economists expected.
The Federal Reserve, which was wrapping up a two-day meeting on
Wednesday, was expected to keep a key interest rate at a record low
near zero as Fed officials continue to believe that the biggest
problems at present are the deep recession and severe financial
crisis, not inflation.
Indeed, Fed officials have expressed concerns about the opposite
problem, that a deepening recession and prolonged housing slump
could push the country into a period of deflation, something not
experienced in the U.S. since the Great Depression.
Falling prices may sound good to consumers, but can actually
make a recession even worse by dragging down Americans' wages, and
clobbering already-stricken home and stock prices. Dropping prices
already are hurting businesses' profits, forcing them to slice
capital investments and lay off workers.
Over the past 12 months, consumer prices have risen just 0.2
percent. That was up slightly from a reading of zero for the 12
months ending in January, which had been the smallest annual change
in more than a half-century.
Gas prices surged 8.3 percent last month after a 6 percent rise
in January. Both gains came after several months of huge declines
in prices at the pump.
Total energy costs rose 3.3 percent in February, almost double
the 1.7 percent January rise. But energy prices are still down 18.5
percent from a year ago. Home heating oil and natural gas prices
both fell in February.
Clothing costs shot up 1.3 percent in February, the biggest
one-month rise since a 1.5 percent increase in March 1990. The gain
likely reflected a rebound from steep discounts offered in January
as retailers were clearing store shelves after the worst holiday
season in decades.
Food costs dipped 0.1 percent last month but are still up 4.7
percent over the past year. Prices for meat and dairy products
fell, while fruits and vegetables rose, according to the Labor
Department report.
Airline fares fell 2.6 percent last month, the biggest drop
since November, but new car prices rose 0.8 percent.
The report on consumer prices followed a report Tuesday that
inflation at the wholesale level rose a slight 0.1 percent in
February.
Only last summer, officials at the Fed had started to worry that
a surge in energy costs could spread to other areas of the economy
and boost inflation to unacceptable levels. But after the financial
crisis struck in the fall, the Fed switched signals and is now
aggressively fighting a deepening recession.
Inflation is not expected be a problem for some time to come
given the prolonged recession, which is already the longest
downturn in a quarter-century.
