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Consumer Price Index rises 0.4 percent in January

WASHINGTON — 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 percent last month, matching December's increase, the Labor Department said Thursday. Over the past year, the index has risen 1.6 percent.

Core prices, which exclude volatile food and energy costs, rose 0.2 percent. That's the largest monthly increase in more than a year. Over the past 12 months, core prices have increased 1 percent, which remains well below the Federal Reserve's comfort zone for inflation of between 1.5 and 2 percent.

Gas prices rose 3.5 percent in January. Food prices climbed 0.5 percent last month, the most in more than two years. Still, food costs in the United States are tame compared with the raging inflation in many developing countries. Those countries are more vulnerable to steep rises in the prices of corn, wheat, coffee and other commodities.

Some companies are trying to pass on higher prices for oil, cotton and agricultural products. 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 the ability of many retailers to raise prices.

"With the unemployment rate still at 9 percent, there will be plenty of downward pressure on underlying prices, and so we don't expect core inflation to trend upward," said Paul Ashworth, an economist at Capital Economics.

Yet many food companies are raising prices in response to a jump in the cost of raw materials. Corn prices have doubled in the past six months. Prices for wheat and soybeans have also risen sharply.

Global food prices have risen 29 percent in the past year, according to a World Bank report Tuesday. They are just 3 percent below the all-time peak reached in 2008.

The impact of rising food prices has been much smaller in the United States than in many other countries. Americans spend a much smaller proportion of their budgets on food — about 14 percent, compared with 40 percent to 50 percent overseas.

And commodity costs make up a smaller portion of food prices. Transportation, processing and packaging account for a much larger chunk, said Kurt Karl, chief U.S. economist at Swiss Re. That means big swings in grain costs have less effect at U.S. grocery stores.

The central bank anticipates that inflation won't exceed 1.7 percent this year.

Consumer Price Index rises 0.4 percent in January 02/17/11 [Last modified: Thursday, February 17, 2011 8:30pm]
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