WASHINGTON - U.S. consumer prices barely rose last month as a sharp increase in energy costs was offset by cheaper clothing, cars and airfares.
The Labor Department said Thursday that the consumer price index rose just0.1 percent in January, down from a 0.2 percent gain in December. Prices have risen 1.6 percent in the past 12 months. Excluding the volatile food and energy categories, core prices also rose just 0.1 percent last month and 1.6 percent in the past year.
The inflation report was one of three released Thursday. The Labor Department said the number of people seeking U.S. unemployment benefits fell last week, and the Conference Board’s index of leading economics indicators rose slightly in January after no change in December.
The year-over-year increase in core prices was the smallest in seven months.
The “mild uptick … confirms the fact that inflationary pressures remain well contained,” Martin Schwerdtfeger, an economist at TD Bank, said in a note to clients.
The small increase occurred even though winter weather pushed up the cost of natural gas, electricity and other home energy sources by the most in more than five years.
Yet other items fell or barely rose: Food prices increased just 0.1 percent, and the cost of men’s clothing fell by the most in nearly five years. New and used car and truck prices also dropped, and airline fares declined 2.2percent.
Inflation has been held back by sluggish growth and a tough job market, which makes it harder for retailers and other businesses to raise prices.
Consumer prices rose just 1.5 percent in 2013, down from 1.8 percent in 2012. Both figures are below the Federal Reserve’s 2 percent inflation target.
While most Americans prefer lower prices, economists warn that super-low inflation may slow economic growth. It can lead consumers to postpone purchases and makes inflation-adjusted interest rates higher, potentially discouraging borrowing.
Low inflation has enabled the Federal Reserve to pursue extraordinary stimulus programs to try and stimulate economic growth.
The Fed is now trying to unwind some of that stimulus. It cut its monthly bond purchases to $65 billion this month, from $75 billion in January and $85 billion last year. The bond purchases are aimed at lowering long-term interest rates to encourage more borrowing and spending.
But Fed policymakers have expressed concern about the persistence of low inflation. If it remains below target, the Fed could extend its stimulus efforts.
The number of people seeking unemployment benefits fell a slight 3,000 last week to a seasonally adjusted 336,000, the Labor Department said Thursday. The four-week average of applications, a less volatile measure, rose slightly to a seasonally adjusted 338,500.
The average is roughly in line with pre-recession levels and indicates that companies are cutting few jobs. Applications are a rough proxy for layoffs.
The number of applicants has stabilized in recent weeks despite modest levels of hiring in January and February. When applications for unemployment benefits remain fairly steady from week to week, it suggests that businesses are confident that customer demand will be strong enough to justify retaining their workers.
A total of 3.53 million Americans received benefits as of Feb. 1 - the latest period for which figures are available - up from 3.52 million the previous week.
The Conference Board’s index of U.S. leading economic indicators climbed in January and the outlook for the next three to six months rose 0.3 percent, the New York-based group said Thursday. The advance matched the median forecast of 50 economists surveyed by Bloomberg.
Higher equity prices and home values last year have helped bolster household wealth, giving Americans the means to sustain spending after a winter-related slowdown. A pickup in job and wage growth after a decline in dismissals would provide an added spark for consumers whose purchases account for almost 70 percent of the economy.
“Interest rates are still extremely low, and housing and equity wealth have generally been rising,” Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, N.Y., said before the report. “The backdrop in terms of financial conditions is quite favorable. I think we’ll continue to see solid growth once we get through the weather effects.”
Estimates in the Bloomberg outlook survey ranged from a decrease of 0.2 percent to an increase of 0.6 percent, after a previously reported 0.1 percent December gain.
Five of the 10 indicators in the leading index contributed to the increase, Thursday’s report showed. They included a drop in unemployment claims and a pickup in factory orders. Declines in building permits and hours worked weighed on the measure.
Information for this article was contributed by Christopher S. Rugaber and Josh Boak of The Associated Press and Katherine Peralta of Bloomberg News.
Business, Pages 28 on 02/21/2014