WASHINGTON (AP) — Consumers paid more in January for everything from food and gas to airline tickets and clothing. The price increases reflect creeping but still-modest inflation.
The Consumer Price Index rose 0.4% last month, matching December's increase, the Labor Department said Thursday. In the past year, the index has risen 1.6%.
Excluding volatile food and energy costs, the core index rose 0.2%. That's the largest increase in more than a year. Core prices increased 1% over the past 12 months. That's higher than December's 0.8% annual pace, but well below the Federal Reserve's preferred range of closer to 2%.
Food prices increased 0.5% in January, the most in more than two years. Gas prices rose 3.5%.
Other reports on Thursday showed:
- More people are applying for unemployment benefits. Applications rose last week to a seasonally adjusted 410,000, the Labor Department said. That follows a week when they fell to their lowest level in three years, although the decline was partly because snowstorms closed some government offices and kept people from applying.
- Fewer homeowners are falling behind on their mortgages. The Mortgage Bankers Association said 8.2% of homeowners missed at least one mortgage payment in the October-December quarter. That's down from 9.1% in the previous quarter and a high of more than 10% in the January-March quarter. But foreclosures are still on the rise.
- The average rate on a 30-year fixed mortgage dipped to 5% this week from 5.05%, according to Freddie Mac. The average rate had reached a 40-year low of 4.17% in November.
- A private research group's gauge of future economic activity rose a slim 0.1% in January, much less than in recent months. The rise in the Conference Board's index of leading economic indicators was the seventh consecutive monthly advance.
The report on consumer prices shows that some companies are seeking to pass on higher prices for oil, cotton, and other commodities. In January, a measure of wholesale inflation rose at the fastest pace in more than two years.
But high unemployment and weak wage increases are limiting retailers from hiking up prices.
"With the unemployment rate still at 9%, there will be plenty of downward pressure on underlying prices and so we don't expect core inflation to trend upwards," Paul Ashworth, an economist at Capital Economics, said.
Federal Reserve officials unanimously concluded late last month that inflation wasn't yet a problem, according to minutes released Wednesday of a Jan. 25-26 meeting. The central bank anticipates inflation won't exceed 1.7% this year.
Still, many prices are starting to rise.
The cost of clothing climbed 1% in January, as companies sought to offset the rising price of cotton.
Airline fares increased for the fifth month in a row, rising 2.2%. Airlines, which are paying about 50% more for fuel than they did a year ago, have raised fares or fuel surcharges on leisure travelers five times since December.
The cost of housing, which makes up about 40% of the core index, rose 0.1%, reflecting increases in rents.
Some goods and services are getting cheaper. New and used car prices fell. Hotel prices dropped 1%. Computer and technology equipment costs fell 0.8%.
Increasing prices for commodities are pushing up costs for businesses, and some are responding by raising their prices. But the impact hasn't broadly affected consumers yet.
Economists expect consumer prices, outside of food and energy, to tick up this year as more companies pass on their rising costs.
And many food companies are raising prices in response to higher costs for corn, wheat and other grains. Corn prices have doubled in the past six months.
Bad weather has damaged harvests in many countries around the world. At the same time, rapid growth in developing countries is raising demand for a range of commodities, pushing up prices.