BLBG: U.S. Consumer Prices Probably Rose in January on Energy Costs
The consumer price index may rise 0.3 percent after a 0.2 percent increase in December, according to the median forecast of 78 economists in a Bloomberg News survey ahead of a Labor Department report in Washington. Excluding energy and food costs, the so-called core index probably rose 0.1 percent, matching the previous month’s gain.
Retailers such as Wal-Mart Stores Inc. have reduced prices to lure customers at a time when most employers are reluctant to hire. The lack of job growth and unemployment that’s forecast to end the year at 9.5 percent is allowing the Federal Reserve to keep interest rates near zero to help maintain the recovery.
“For now, the inflation outlook is benign,” said Chris Low, chief economist at FTN Financial in New York. “We expect inflation to moderate in the year ahead.”
The report is due at 8:30 a.m. in Washington. Forecasts in the Bloomberg survey ranged from no change to a gain of 0.6 percent.
January’s increase was probably led by higher gasoline prices. 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.
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 bankers 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 policy 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.
Consumer prices are forecast to rise 2.8 percent from the same month last year, the most since October 2008, according to the survey median. The year-over-year gains in the consumer price index are getting bigger, reflecting crude oil prices that have been climbing from an almost five-year low in December 2008.
Broadest Measure
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.
Higher raw materials costs reflect a pickup in manufacturing that’s helped the economy recover from the worst recession since the 1930s. An absence of job growth may limit consumer spending and the pace of the expansion. The Standard & Poor’s 500 Index has declined 0.8 percent so far this year after surging almost 24 percent in 2009.
Even with higher production and material prices, U.S. companies are reluctant to pass on the costs to consumers and risk losing sales. Wal-Mart, the world’s largest retailer, reported fourth-quarter sales yesterday that trailed its projection even after cutting grocery and electronic prices.
The Bentonville, Arkansas-based company reduced prices of laptop computers among other goods 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.
