Consumer prices rose sharply in February, up 0.7 percent, according to the Bureau of Labor Statistics. This is the fastest pace of monthly growth in prices since June 2009, following unchanged levels of consumer prices in both December and January. With that said, the consumer price index (CPI) reflects relatively modest inflation, up 2.0 between February 2012 and February 2013.
Higher energy costs were largely to blame for last month’s jump in the CPI, with gasoline prices up 8.6 percent. Overall, the cost of all forms of energy rose 5.4 percent. Note that these price increases, though, follow several months of declines. On a year-over-year basis, for instance, gasoline prices are up just 3.3 percent, which is less dramatic.
Food prices were up a very modest 0.1 percent, both for items purchased at grocery stores and at restaurants. Higher prices for fruits, vegetables, and some meat items were offset by lower costs for cereal and dairy products. Over the course of the past year, food prices have risen 1.6 percent, a deceleration from the beginning of last year. In February 2012 (one year ago), for example, the year-over-year rate was 3.9 percent, with consumers citing higher food costs in many sentiment surveys.
Core inflation – with excludes food and energy costs – appears to be in-check, at least for now. The annual pace is 2.0 percent, which is in-line with the stated goal of the Federal Reserve Board. That has allowed the Federal Open Market Committee, which meets again this week, to pursue expansionary policies to try to stimulate economic growth. Right now at least, the Fed appears to be more worried about elevated unemployment and slowing economic activity than it is about inflationary pressures. That could change, but not in the foreseeable future.
Chad Moutray is chief economist, National Association of Manufacturers.