Retail prices rose 1.1 percent last month, the most in seven-and-a-half years, as consumers suffered from high food and fuel costs brought on by December's frigid weather, the government said Wednesday. Leaving food and energy aside, prices rose by 0.6 percent in January, the steepest increase in a year and double the December pace.
The White House called the news disappointing and private analysts also expressed concern.
"Unfortunately, this increase was not all food and energy," said Allen Sinai, chief economist at The Boston Co. "This indicates an entrenched inflation that will not easily recede."
The Labor Department said the increase in its seasonally adjusted Consumer Price Index was the largest since a 1.1 percent gain in June 1982. The department said that 60 percent of the January increase came in food and energy prices.
The frigid weather a month earlier, it was the fourth-coldest December since records were first kept 96 years ago, drove down fuel stocks and damaged fresh fruits and vegetables, driving prices up.
Analysts said food and energy prices should ease by March.
"In fact, we're already beginning to see food and energy prices come down," said Lawrence Chimerine, senior economic adviser for the WEFA Group in Bala Cynwyd, Pa. "Certainly, starting with the March CPI number, we'll see much smaller increases."
Nevertheless, there was concern that the so-called core inflation, prices excluding the volatile food and energy sectors, rose 0.6 percent last month, double December's increase and the largest since an identical 0.6 percent jump in January 1989.
At the White House, presidential press secretary Marlin Fitzwater called the jump "disappointing news" but said the administration expects the core rate to decline steadily over the year.
"We are hopeful that this is a bulge that will be temporary in nature, but inflation requires eternal vigilance and we remain on a policy of wanting steady growth with low inflation," he said.
John Silvia, an economist with Kemper Financial Services in Chicago, noted that in addition to food and energy, all other categories posted increases except apparel, which was unchanged.
"The surprising breadth of the increases .
. suggests that core inflation is 4.5 to 5 percent," he said. "If we're stuck there, that means the Fed is stuck."
Federal Reserve Chairman Alan Greenspan told Congress on Tuesday that a reversal of the "horrendous" January consumer price rise was under way but added that inflationary pressures remain too high and indicated the Fed would continue its tight-credit and high-interest policies.
Greenspan also said the Fed had lowered its overall inflation estimate for 1990 to 4 percent to 4.5 percent, down from a June forecast of 4.5 percent to 5 percent. The Bush administration is forecasting a 4.1 percent inflation rate.
Overall, food prices advanced 1.8 percent while energy costs increased 5.1 percent, including a record 26.3 percent rise for fuel oil. Gasoline prices rose 7.7 percent rise while natural gas and electricity costs combined increased 0.3 percent.