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Inflation Modest in February

Consumer prices grew 0.4% in February, the Labor Department reported, the biggest gain in seven months as gasoline prices increased again and clothing costs jumped. Core inflation, which excludes food and energy, rose 0.2% in February. Yet, despite the February gain, inflation is not expected to pose a problem this year due to the recession. Rather, Federal Reserve officials have expressed concerns that a deepening recession and protracted housing slump could push the country into a period of deflation. Over the past 12 months, consumer prices have risen 0.2%. Gas prices surged 8.3% last month after a 6% gain in January. Both gains followed several months of huge declines in prices at the pump. Total energy costs were up 3.3% in February, although energy prices are still down 18.5% from a year ago. Clothing costs increased 1.3% in February, which likely reflected a rebound from steep discounts offered in January when retailers were scrambling to clear store shelves. Food costs dipped 0.1% last month.

Meanwhile, wholesale prices grew a slight 0.1% in February, the Labor Department reported, as a second monthly increase in energy costs offset a drop in food prices. The increase followed a 0.8% jump in January. Compared with a year ago, wholesale prices are actually down 1.3%. Core inflation, which excludes energy and food, increased 0.2% in February, after a 0.4% gain in January. The small increase in February reflected a 1.3% jump in energy prices. Gasoline prices climbed 8.7% in February after a 15% surge in January. Food costs fell for a third straight month, dropping 1.6%, the biggest one-month decline in three years.

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Date Last Updated: 03/18/2009