Consumer prices post another big increase

Consumer prices post another big increase

Consumer prices rose higher than expected in January.

WASHINGTON (AP) — Consumers paid more to fill up their gas tanks, buy groceries and go to the hospital in January as prices on a wide range of items pushed higher.

Inflation was increasing even as the economy was slowing dramatically, a development certain to raise concerns at the Federal Reserve, which has been cutting interest rates aggressively in the belief that fighting off a threatened recession was more important than worrying about inflation pressures.

The Labor Department reported that its closely watched Consumer Price Index posted a gain of 0.4 percent last month, matching the December increase and higher than the 0.3 percent rise that analysts had expected.

Food costs jumped by the largest amount in 11 months, led by big gains for vegetables, fruit, poultry and pork.

Core inflation, which excludes food and energy, rose by 0.3 percent, the biggest jump in this measure in seven months. That increase reflected higher prices for medical care, education, clothing, tobacco and airline fares.

“The economy may be faltering, but that has not stopped firms from raising prices,” said Joel Naroff, chief economist at Naroff Economic Advisers.

“It didn’t matter whether you went to the supermarket or ate out, costs were up.”

With the latest increase, core prices have risen over the past 12 months by 2.5 percent, the biggest jump in 10 months and far above the Fed’s comfort zone of 1 percent to 2 percent gains in the underlying inflation rate. The increase in inflation pressures is coming at a time when economic growth has slowed sharply, raising concerns that the country might be in danger of falling into a recession.

The Fed last month began an aggressive campaign to cut interest rates, lowering a key rate by the largest amount in a single month in more than a quarter-century. Analysts said they believe the Fed will see the threat of a recession as a bigger risk at the moment than the rise in inflation.

But some predicted the Fed might cut rates by a smaller quarter-point cut at the March 18 meeting rather than the half-point move that markets are now expecting.

A second report Wednesday showed that the housing sector remains in a steep downturn.

Construction of new homes and apartments edged up by a slight 0.8 percent in December to an annual rate of 1.012 million units.

But all of the strength came from a rebound in apartment construction, which had plunged in December. The larger single-family sector fell by 5.2 percent last month.

And applications for building permits, considered a good sign of where construction is headed, fell by 3 percent to an annual rate of 1.048 million units, the lowest level since November 1991.