Higher petrol costs push up US consumer prices

US CONSUMER prices rose the most in 10 months in February as the cost of gasoline spiked, but there was little sign that underlying inflation pressures were building up.

Surging gasoline prices put a small dent in consumer confidence early this month, other data showed yesterday. Still, Americans do not believe the sharp run up in prices will last.The Labor Department said the Consumer Price Index rose 0.4 per cent in February after advancing 0.2 per cent in January.

Gasoline accounted for more than 80 per cent of the rise. Stripping out volatile food and energy costs, the so-called core CPI edged up just 0.1 per cent.

“Consumer purchasing power, at least for the next few months, is going to remain pressured by rising gasoline prices,” said Sam Bullard, a senior economist at Well Fargo Securities in Charlotte, North Carolina. However, he said a trend toward lower inflation was still in place.

Consumer prices rose 2.9 per cent last month from a year-ago, unchanged from January but down from a peak of 3.9 per cent in September. The core index was up 2.2 per cent over the 12 months through February, down from 2.3 per cent in January.

The Federal Reserve said on Tuesday the recent spike in energy costs would likely lift inflation only temporarily. Over a longer horizon, it said inflation was poised to run at or below its 2 per cent target.

Gasoline prices have increased 53 cents since the start of the year to an average of $3.88 a gallon in the week to Monday. That helped pull the Thomson Reuters/University of Michigan index on consumer sentiment down to 74.3 early this month from 75.3 in February.

Consumer expectations for inflation one year ahead jumped to 4 per cent from 3.3 per cent, but the five-year reading rose only slightly to 3 per cent and the survey’s director said Americans do not expect the steep climb in gasoline costs to last.

“Overall, the data indicate that $4 gasoline has lost its shock value, although the drain on discretionary income will still affect spending, mostly among lower-income households,” survey director Richard Curtin said. – (Reuters)