By Wenjing Yang
The U.S. consumer price index recorded its biggest increase in nearly four years in January, led by higher costs for gasoline and signaling that inflation may be gaining momentum.
The CPI, which measures the price changes of certain consumer goods and services purchased by households, climbed a seasonally adjusted 0.6 percent last month after gaining 0.3 percent in December. It was the largest monthly increase since February 2013, according to the U.S. Bureau of Labor Statistics.
The CPI rose 2.5 percent in the 12 months ended January 2017, following a 2.1 percent rise in the year to December. It was the biggest annual increase since March 2012.
Chicago-area consumers interviewed while on lunch break said price increases are noticeable.
Brian Bird, 50, who works at a commercial insurance company in Chicago, said housing is expensive as well as taxes, while prices of gasoline, food and transportation are much the same.
Cynthia Rouse, 52, said that consumer goods especially grocery and food items have become increasingly expensive.
“Our pricing is increasing on our consumer products of where we’re living, and it’s extremely high in Illinois,” Rouse said.
Pam Torrence, 45, who works at a healthcare company in Chicago, has not felt price pressures so far, but said she fears healthcare costs could rise if the Affordable Care Act is dismantled by the Trump administration.
The core CPI, which strips out food and energy costs, rose 0.3 percent last month after a 0.2 percent gain in December. For the full year, the core CPI rose 2.3 percent, and puts consumer price inflation above the Federal Open Market Committee’s 2 percent inflation target for two months in a row.
Both headline and core inflation topped expectations of economists surveyed by Bloomberg.
“What we think it shows, and it’s shown over recent months, is that inflation is accelerating,” said Andrew Opdyke, economist at First Trust Portfolios LP, in a phone interview.
Price pressures, in line with economic growth, are likely to remain an upward trend amid expectations of fiscal stimulus from President Donald Trump, who has proposed declining regulations on business and cutting taxes, Opdyke said.
Rising inflation and stronger economy growth, if sustained, may push the Federal Reserve to raise short-term interest rates, Opdyke added.
Federal Reserve Chair Janet Yellen also hinted at another rate hike in her semi-annual report to Congress this week, saying “waiting too long to remove accommodation would be unwise.”
Gasoline prices surged 7.8 percent in January, accounting for nearly half of the rise in the CPI. The energy index increased 4 percent in January and 10.8 percent in 12 months, its largest yearly increase since late 2011.
The indexes for apparel, new vehicles, motor vehicle insurance, and airline fares all rose 0.8 percent or more.
Housing continued its upward march in January. Rents increased 0.3 percent last month and jumped 3.6 percent in the year through January.
The food index increased 0.1 percent after remaining unchanged for six consecutive months, driven by a 0.4 percent increase in prices for food away from home.