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Consumer prices in US increase more than forecast

Consumer prices in the US rose more than forecast last month, indicating that the slowing US economy hasn't alleviated inflation pressures.

The 0.4 percent increase in the cost of living matched the gain in December, the Labor Department said yesterday in Washington. Excluding food and energy, prices rose 0.3 percent, after a 0.2 percent climb a month earlier, leading the so-called core rate to the biggest increase since June 2006.

A jump in food and energy costs, rents and clothing prices led the index higher last month. The report underscores that Federal Reserve policy makers can't set aside inflation concerns as they weigh more interest-rate cuts to prevent a recession.

"It's not a very welcome report from the Fed's perspective," said Zach Pandl, an economist at Lehman Brothers Holdings Inc in New York. "We still think the slowing economy will bring down inflation but we are seeing a lot of cost pressures still and that slowdown in inflation looks like it will be gradual."

Economists forecast the consumer price index (CPI) would rise 0.3 percent, according to the median of 74 projections in a Bloomberg News survey. Estimates ranged from an increase of 0.1 percent to one of 0.4 percent.

Core consumer prices were forecast to rise 0.2 percent, the survey showed. Estimates ranged from a gain of 0.1 percent to an increase of 0.3 percent.

Energy prices last month increased 0.7 percent, after rising 1.7 percent the previous month. Fuel costs were up 4.5 percent.

Food prices, which account for about a fifth of the CPI, rose 0.7 percent. Apparel prices rose 0.4 percent after a 0.1 percent increase in December.

The consumer price index is the government's broadest gauge of costs for goods and services. Almost 60 percent of the CPI covers prices that consumers pay for services ranging from medical visits to airline fares and movie tickets.
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