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Consumer prices up as gas, clothing costs rise
Question of the Day
WASHINGTON — Consumer prices rose modestly in January on higher costs for food, gas, rent and clothing.
But economists downplayed the increase, saying inflation will likely ease in the coming months as prices for raw materials level off.
The consumer price index increased 0.2 percent last month, after a flat reading in December, the Labor Department said Friday.
Excluding volatile food and energy, so-called “core” prices ticked up 0.2 percent. A big reason for the increase was that clothing prices jumped 0.9 percent. Medical care, rent and tobacco prices also increased.
Car prices were unchanged, and airfares fell.
Core inflation over the past 12 months moved up to 2.3 percent — its highest point in more than three years. A steady rise in core prices could limit the Federal Reserve’s ability to take steps to boost the economy.
Still, economists said inflation is likely peaking. For example, clothing prices are higher because of spike last year in the cost of cotton. When the impact of the cotton hike fades, clothing costs should level off.
The report “points to a benign path for inflation for 2012,” LeBas said. “Consumer demand is fairly anemic right now … firms can’t raise prices when nobody’s buying.”
A small amount of inflation can be good for the economy. It encourages businesses and consumers to spend and invest money sooner rather than later, before inflation erodes its value.
And modest inflation, combined with recent increases in income, gives consumers more buying power and should add to economic growth.
Retailers are still reluctant to charge more, even as the economy grows at a moderate pace. Many relied on heavy discounting to boost holiday sales last year.
Oil and gas prices have increased again after dropping late last year, though that has been offset somewhat by falling natural gas costs. The average price for a gallon of gas rose to $3.52 on Thursday, up 14 cents from the previous month.
Falling energy and food costs kept wholesale prices in check last month, the Labor Department said Thursday. The producer price index rose 0.1 percent in January, after dropping the same amount the previous month.
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