Weekly interest and loan rates | Home values Northwest stock contest 2004 | Consumer affairs

High energy costs fuel rise in consumer prices

By Jeannine Aversa
The Associated Press

	E-mail this article Print this article Search archive

The increase in the Consumer Price Index, the government's most closely watched inflation measure, however, marked a slowdown from the 0.5 percent jump registered in January, the Labor Department reported yesterday.

Excluding energy and food costs, "core" consumer prices rose by just 0.2 percent in February for the second month in a row. That suggested the prices for many goods and services were fairly stable.

Tame inflation also continued in the Seattle metropolitan area.

The local inflation index for February, which the government measures every other month, rose 1.3 percent from December 2003, and was up 1.2 percent from February 2002. Seattle-area price levels, which rose steadily during the late-1990s boom, have been almost flat for the past year and a half — up just 1.7 percent since August 2002.

Federal Reserve Chairman Alan Greenspan and his colleagues said inflation is not a problem for the economy. That's one of the main reason why Fed policy-makers have leeway to hold short-term interest rates at a 45-year low of 1 percent, as they did Tuesday.

"With inflation quite low and resource use slack, the committee believes that it can be patient in removing its policy accommodation," the Fed said. Some private economists viewed that language, along with the Fed's concerns about slow job growth, as meaning Fed policy-makers may not move to raise rates until 2005. Short-term rates have been at 1 percent since June.

From an economic point of view, "inflation is largely contained," said economist Richard Yamarone of Argus Research. But from a consumer perspective, "life's necessities, namely energy, are more expensive."

The 0.3 percent increase in the CPI in February matched economists' forecasts. The 0.2 percent rise in "core" prices was slightly bigger than the 0.1 percent increase they were calling for.

Energy prices went up by 1.7 percent in February. While that marked a slowdown from the big 4.7 percent rise reported for January, there is little doubt that consumers continue to feel the sting of higher energy bills.

Gasoline prices increased by 2.5 percent, natural gas prices were up by 2.2 percent, fuel oil prices rose 1.1 percent and electricity prices edged up 0.2 percent last month.
 
Strong global demand and tight supplies have pushed energy prices up. Looking ahead, some analysts foresee higher prices at the gasoline pumps this summer. If gasoline and other energy prices stay high, that could damp consumer spending, an important factor shaping the economy, some analysts said.

Treasury Secretary John Snow, appearing on CNBC, called higher oil prices an unwelcome development and said he hoped energy prices would recede.

Food prices, meanwhile, increased by 0.2 percent in February, after being flat in January. Rising prices for fruits and vegetables outweighed falling prices for beef, pork, poultry and dairy products last month.

Elsewhere in the report, air fares rose 1.2 percent and new car prices rose 0.4 percent in February.

Costs for doctors' services jumped by 1.1 percent in February — the largest increase since May 1993. Prices for college tuition and fees increased by 0.5 percent in February. Rising costs for medical services and for education have been fairly constant sore spots for consumers.

Clothing prices, however, dipped by 0.1 percent, computer prices dropped by 1.2 percent and lodging costs fell by 1.6 percent in February.

Seattle Times business reporter Drew DeSilver contributed to this report.

Copyright © 2004 The Seattle Times Company