US consumer prices rose the most in 10 months last month as the cost of gasoline spiked, but there was little sign that underlying inflation pressures were building up.
Surging gasoline prices put a small dent in consumer confidence early this month, other data showed on Friday. Still, Americans do not believe the sharp run-up in prices will last.
The Labor Department said the Consumer Price Index (CPI) rose 0.4 percent last month after advancing 0.2 percent in January. Gasoline accounted for more than 80 percent of the rise.
Stripping out volatile food and energy costs, the so-called core CPI edged up just 0.1 percent.
“Consumer purchasing power, at least for the next few months, is going to remain pressured by rising gasoline prices,” said Sam Bullard, a senior economist at Well Fargo Securities in Charlotte, North Carolina.
However, he said a trend toward lower inflation was still in place.
Consumer prices rose 2.9 percent last month from a year ago, unchanged from January but down from a peak of 3.9 percent in September. The core index was up 2.2 percent over the 12 months through last month, slowing from 2.3 percent in January.
The US Federal Reserve said on Tuesday the recent spike in energy costs would likely lift inflation only temporarily. Over a longer horizon, it said inflation was poised to run at or below its 2 percent target.
Gasoline prices have increased US$0.53 since the start of the year to an average of US$1 a liter in the week to Monday last week.
That helped pull the Thomson Reuters/University of Michigan index on consumer sentiment down to 74.3 early this month, from 75.3 last month.
Consumer expectations for inflation one year from now jumped to 4 percent from 3.3 percent, but the five-year reading rose only slightly to 3 percent, and the survey’s director said Americans did not expect the steep climb in gasoline costs to last.
“Overall, the data indicate that US$4 gasoline has lost its shock value, although the drain on discretionary income will still affect spending, mostly among lower-income households,” survey director Richard Curtin said.
Inflation expectations among investors, as signaled by spreads in the bond market, have also been on the rise, supported by a stream of relatively upbeat economic data. However, inflation expectations, as measured in the US Treasuries debt market, fell back a bit after the CPI report.
Tensions over Iran’s nuclear program have kept alive fears of oil supply disruptions and have pushed prices higher.
With gasoline weighing on the economy’s recovery, US President Barack Obama, who faces re-election in November, has been considering tapping strategic oil stocks to ease the price pressure.
Other data on Friday showed the economy continues to expand moderately. Production at US mines, factories and utilities held steady last month after a 0.4 percent gain in January, the Federal Reserve said.
Manufacturing output rose 0.3 percent, even as automakers cut production by 1.1 percent after two big monthly gains. Carmakers had raised production to meet pent-up demand for popular models in short supply.
“While higher energy prices and the eurozone recession are headwinds for manufacturers, an expanding US economy, propelled by strengthening job market gains, should keep factory activity strong this year,” said Paul Edelstein, an economist at IHS Global Insight in Lexington, Massachusetts.