WASHINGTON - The Labor Department said Tuesday that the consumer price index rose 0.2 percent in March, after scant 0.1 percent increases in the previous two months.
Prices have risen just 1.5 percent year over year. That remains well below the Federal Reserve’s 2 percent target for inflation.
“The overall picture is that inflation has stopped falling and is on a gradual uptrend,” said Thomas Costerg, an economist at Standard Chartered Plc in New York. “To some extent, today’s numbers relieve fears about the U.S. slipping into deflation.”
Excluding the volatile food and energy categories,core prices increased 0.2 percent in March and 1.7 percent in the past year.
Prices at the gas pump fell 1.7 percent in March, lowering costs for the overall energy category.
But food prices jumped 0.4 percent, led by increases in eggs, milk, butter, oranges, pork chops, ground beef and poultry. Prices for clothing, used cars and cable television also rose.
About two-thirds of the increase in core prices reflected rising rents as more Americans forgo home ownership.
Owners-equivalent rent, one of the categories designed to track rental prices, climbed 0.3 percent. Over the past 12 months, shelter costs, which also include hotel rates, increased 2.7 per-cent, the biggest gain since March 2008.
Overall, signs point to continued low inflation. Sluggish growth and a tough job market have limited price increases, making it harder for retailers and other businesses to charge more.
“Prices are creeping higher,” said Jennifer Lee, senior economist at BMO Capital Markets. “But with wage growth still modest and lots of retail competition, inflation should remain in check for now.”
Consumer prices rose just 1.5 percent in 2013, down from 1.8 percent in 2012.
Though shoppers welcome lower prices, super low inflation can stall economic growth. Lower prices encourage consumers to delay purchases. Extremely low inflation also can raise inflation-adjusted interest rates, thereby discouraging borrowing.
Still, low inflation has enabled the Fed to pursue extraordinary stimulus programs to try to enhance economic growth.
The Fed is now trying to unwind some of that stimulus. It plans to buy $55 billion in bonds this month, down from the $85 billion a month bought last year. The bond purchases have been intended to lower long-term rates, which can spur borrowing and spending.
Despite scaling back its purchases, Fed officials have expressed concern about inflation running below their target. As a result, the Fed is prepared to hold shorter-term rates near zero even if unemployment falls by roughly a percentage point from its current level of 6.7 percent. This suggests that the Fed might not raise short-term rates until the middle of 2015.
U.S. home builders’ confidence in the housing market rose modestly in April but remained at low levels for the third-straight month, constrained by tight credit for home buyers and a shortage of workers and available land.
The National Association of Home Builders/Wells Fargo builder sentiment index, which measures confidence in the single-family home market, edged up to 47 in April from 46 in March, the home builders group reported Tuesday.
Readings below 50 mean builders view sales conditions as poor. The index had been above 50 from June through January.
Builders recently have complained that they can’t find enough workers or lots to build on.
Many home buyers also have had trouble qualifying for mortgages. The home builders’ index of traffic by prospective buyers stayed at 32 in April.
The latest reading, based on responses from 301 builders, comes as the spring home-selling season gets going. The season typically sets the pattern for residential hiring and building construction in the ensuing months. The overall confidence index was below 50 in all four regions of the United States - 36 in the Northeast, 45 in the West and 48 in the Midwest and South.
“Builder confidence has been in a holding pattern the past three months,” said Kevin Kelly, chairman of the home builders association and a developer from Wilmington, Del. “Looking ahead, as the spring home buying season gets into full swing and demand increases, builders are expecting sales prospects to improve in the months ahead.”
Information for this article was contributed by Josh Boak and Paul Wisemn of The Associated Press and by Shobhana Chandra of Bloomberg News.
Business, Pages 27 on 04/16/2014