U.S. consumer prices saw modest February increase

By The Associated Press | March 12, 2019 | Last updated on March 12, 2019
2 min read
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U.S. consumer prices rose 0.2% in February, pushed up slightly by higher gasoline and housing costs even as the prices for autos and clothing slumped.

The Labor Department said Tuesday that the consumer price index rose a modest 1.5% last month from a year ago.

Inflation has been muted despite the solid job market, causing average hourly earnings—after being adjusted for consumer prices—to climb 1.9% in the past year. This marks the strongest inflation-adjusted wage growth since November 2015, an increase that would likely help consumer spending and economic growth.

The low level of inflation also gives the Federal Reserve more flexibility in holding off on further increases to a key short-term interest rate, enabling the U.S. central bank to provide support for economic growth.

Some economists expect inflation to pick up as the benefits of higher wages flow through the economy.

“Although inflation has slowed in recent months, it should move gradually higher in the spring and summer,” said Gus Faucher, chief economist at PNC Financial Services. “Higher energy prices will push up overall inflation, and rising wages will lead businesses to raise prices in an effort to maintain profit margins.”

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the consumer price index could breach 2.5% by the end of the year, which could create a problem for the Fed if it holds rates at their current level for 2019.

Still, even with modest inflation, many Americans are already facing higher prices for basic necessities. Housing costs continue to outpace overall inflation, rising 3.4% from a year ago. School tuition and child care costs have increased 3% over the past 12 months. Food prices jumped 0.4% in February.

Gasoline prices surged 1.5% in February, but they’re 9.1% lower from last year. Clothing prices plunged 1% in February, while new-auto prices slipped 0.2%.

Excluding the volatile energy and food categories, core prices increased 0.1% in February and 2.1% from a year ago.

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