US consumer prices show biggest annual increase since '12

Washington - The US cost of living rose in February, while prices increased from a year ago by the most since March 2012, reinforcing the view that inflation is in line with the Federal Reserve’s goal.

The consumer-price index climbed 0.1% from the previous month after a 0.6% January advance that was the largest in nearly four years, Labour Department figures showed on Wednesday. The median forecast in a Bloomberg survey called for no change. Compared with February 2016, the CPI was up 2.7%.

The figures are consistent with the Fed’s inflation objective and, combined with a labour market at or near full employment, help explain why policy makers will probably raise interest rates later on Wednesday. Some commodity prices have rebounded and other costs including rents and medical expenses continue to firm up.

Bloomberg survey estimates for the consumer price index ranged from a 0.1% decline to a 0.2% gain.

The core CPI measure, which excludes volatile food and fuel costs, rose 0.2% after a 0.3% gain in the previous month. It increased 2.2% from February 2016, after rising 2.3%.

The Bloomberg survey median called for the core index to rise 0.2% from the previous month and 2.2% from the prior year.

The Fed’s preferred gauge of inflation, which is the Commerce Department’s personal consumption expenditures measure, climbed 1.9% in January from a year earlier. It hasn’t matched the central bank’s 2% goal since April 2012.

Cheaper gasoline

Energy costs decreased 1% from a month earlier, the first decline since July and reflecting a 3% drop in gasoline, the Labor Department’s report showed. Food prices rose 0.2%, the biggest advance since September 2015.

Expenses climbed in February for shelter, recreation, clothing, air fares and medical care. 

Prices fell for new and used vehicles and household furnishings.

Expenses for shelter climbed 0.3%. Owners-equivalent rent, one of the categories designed to track rental prices, also rose 0.3%.

Expenses for medical care increased 0.1%. These readings often vary from results for this category within the Fed’s preferred measure of inflation. Economists attribute the discrepancy to different methodologies.

The CPI is the broadest of three price gauges from the Labour Department because it includes all goods and services. About 60% of the index covers prices consumers pay for services from medical visits to airline fares, movie tickets and rents.

The rise in the cost of living over the past year has meant little in the way of bigger paychecks, a separate report from the Labor Department showed. Hourly earnings adjusted for inflation were unchanged from February 2016.

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