Consumer Prices in U.S. Rise Less Than Anticipated

The cost of living in the U.S. rose in January less than anticipated and a measure of prices excluding food and fuel fell for the first time since 1982, indicating the recovery is showing few signs of inflation.

The consumer-price index increased 0.2 percent for a fifth straight month, led by higher fuel costs, Labor Department figures showed today in Washington. Excluding energy and food, the so-called core index unexpectedly fell 0.1 percent, reflecting a drop in new-car prices, clothing and shelter.

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Companies may have little success raising prices with unemployment projected to end the year at 9.5 percent. The yield on the 10-year Treasury note fell after the report showed restrained inflation will allow Federal Reserve policy makers to keep interest rates close to zero to help support the recovery.

“The broader picture remains one of subdued inflation, and this gives the Fed ample reason to stay on the sidelines until at least very late in the year,” said Aaron Smith, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania, who forecast no change in the core index.

Economists forecast the consumer-price index would rise 0.3 percent in January from a month earlier, according to the median of 78 projections in a Bloomberg News survey. Estimates ranged from no change to a gain of 0.6 percent.

The core index was forecast to rise 0.1 percent, according to the Bloomberg survey. The decline in the core was the first since December 1982.

Treasuries, Stocks

Treasury prices rose, pushing down the yield on the 10-year note one basis point to 3.79 percent at 8:42 a.m. in New York. Stock-index futures maintained losses, with futures on the Standard & Poor’s 500 Index expiring in March declining 0.4 percent to 1,100.7.

Energy costs jumped 2.8 percent in January, led by higher prices for fuel oil and gasoline. The cost of crude oil on the New York Mercantile Exchange averaged $78.40 last month, up from $74.60 in December.

Gasoline prices increased 4.4 percent, the most since August. The cost at the pump rose 10 cents to $2.71 a gallon on average in January, from $2.61 the previous month, according to AAA. The price has since retreated.

Compared with January 2009, the CPI rose 2.6 percent after climbing 2.7 percent the previous month. The year-over-year gains in the consumer price index have been getting bigger as crude oil prices increase from an almost five-year low in December 2008.

Food, Shelter

Food costs, which account for about 15 percent of the CPI, increased 0.2 percent in January, reflecting higher prices for dairy products, meat and fruits and vegetables.

Shelter costs that include lodging away from home and rental properties fell 0.5 percent. Owners-equivalent rent, one of the categories used to track rental prices, fell 0.1 percent last month after no change.

New-car prices fell 0.5 percent in January, the most since August, and apparel costs dropped 0.1 percent. Medical-care costs rose 0.5 percent in January, the most in two years.

The Fed’s long-term forecast for its preferred measure of inflation, the Commerce Department’s index tied to consumer spending and excluding food and fuel, calls for gains in a range of 1.5 percent to 2 percent. That gauge, which is typically lower than the CPI, was up 1.5 percent in the 12 months ended in December.

‘Subdued Inflation’

Fed Chairman Ben S. Bernanke said last week that the central bank expects economic conditions, including “subdued inflation trends,” that may warrant an “exceptionally low” benchmark interest rate “for an extended period.”

Central bank policy makers last month “agreed that underlying inflation currently was subdued and was likely to remain so for some time,” according to minutes of the Jan. 26- 27 meeting released this week.

Consumers in the Reuters/University of Michigan preliminary survey, released Feb. 12, said they expect an inflation rate of 2.8 percent over the next five years. Those figures are tracked by Fed policy makers.

The CPI is the broadest of the three monthly price gauges from the Labor Department because it includes goods and services. Reports this week showed 1.4 percent gains in both the cost of imported goods and wholesale prices in January. Both increases were more than anticipated.

Almost 60 percent of the CPI covers prices consumers pay for services ranging from medical visits to airline fares and movie tickets. Airline fares fell 2.5 percent in January, the most since February 2009.

Companies Reluctant

Even with higher production and material costs, U.S. companies are reluctant to pass on the expenses to consumers. Wal-Mart, the world’s largest retailer, reported fourth-quarter sales yesterday that trailed its projection after cutting grocery and electronic prices.

The Bentonville, Arkansas-based company reduced the cost of laptop computers, along with turkeys and cranberry sauce for holiday meals, to attract shoppers living paycheck to paycheck. “We see the influence of the paycheck cycle as pronounced now as it’s been in the past,” Chief Financial Officer Tom Schoewe said on a call with reporters.

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