Cheaper gasoline restrains US consumer prices

Cheaper gasoline restrains US consumer prices

US gasoline prices
The Labour Department said its Consumer Price Index in January was held down by cheaper gasoline, which offset increases in the cost of food and rents. (AFP/RONALDO SCHEMIDT)

WASHINGTON: US consumer prices were unchanged for a third straight month in January, leading to the smallest annual increase in inflation in more than 1-1/2 years, which could allow the Federal Reserve to hold interest rates steady for a while.

The Labour Department said on Wednesday (Feb 13) its Consumer Price Index last month was held down by cheaper gasoline, which offset increases in the cost of food and rents.

In the 12 months through January, the CPI rose 1.6 per cent, the smallest gain since June 2017. The CPI increased 1.9 per cent on a year-on-year basis in December.

Excluding the volatile food and energy components, the CPI gained 0.2 per cent, rising by the same margin for a fifth straight month. In the 12 months through January, the so-called core CPI rose 2.2 per cent for a third straight month.

Economists polled by Reuters had forecast the CPI edging up 0.1 per cent in January and the core CPI rising 0.2 per cent.

The dollar rose against a basket of currencies after the data, while US stock index futures held gains. Prices of US Treasuries were trading lower. Despite the increases in the core CPI, underlying inflation remains moderate. 

The Fed, which has a two per cent inflation target, tracks a different measure, the core personal consumption expenditures (PCE) price index, for monetary policy.

The core PCE price index increased 1.9 per cent on a year-on-year basis in November after rising 1.8 per cent in October. It hit two per cent in March 2018 for the first time since April 2012. PCE price data for December will be released on Mar 1.

It was delayed by a five-week partial shutdown of the federal government that ended on Jan 25.

The Fed kept interest rates unchanged last month and removed from its December policy statement promises of "further gradual increases" in borrowing costs. The US central bank said it would be "patient" before making further rate hikes.

MORE EXPENSIVE FOOD

With the January inflation report, the government started quality adjusting the CPI series related to telecommunications services such as land-line telephones, internet, cable and satellite television, to account for rapid technological change.

Inflation is remaining moderate despite a tightening labor market, in part because of slowing economic growth in China and Europe, which is helping to lower oil prices.

In January, gasoline prices fell 5.5 per cent after dropping 5.8 per cent in December. Food prices increased 0.2 per cent, rising for a third straight month.

Food consumed at home edged up 0.1 per cent last month. There were increases in the prices of poultry, eggs, fish and beef. But consumers paid less for fruits, vegetables, cereals and dairy products.

Owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, increased 0.3 per cent in January after gaining 0.2 per cent in the prior month. The cost of postage stamps jumped 1.7 per cent and households paid more for land-line telephone services.

Healthcare costs rose 0.2 per cent after advancing 0.3 per cent in December, with doctor visits costing more. Apparel prices jumped 1.1 per cent last month, the biggest increase since February 2018.

There were also increases in the prices of new motor vehicles as well as used cars and trucks. Airline fares dropped 0.9 per cent. The cost of motor vehicle insurance fell for a third straight month.

Source: Reuters

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