U.S. consumer prices slow rise in March

COST OF LIVING in the U.S. increased at a slower pace in March as the run-up in energy prices eased, supporting the view of some Federal Reserve policy makers that inflation will ebb.
Posted 4/13/12

WASHINGTON - The cost of living in the U.S. increased at a slower pace in March as the run-up in energy prices eased, supporting the view of some Federal Reserve policy makers that inflation will ebb.

The consumer-price index climbed 0.3 percent, matching the median forecast of economists surveyed by Bloomberg News, after increasing 0.4 percent the prior month, Labor Department data showed today in Washington. The so-called core measure, which excludes more volatile food and energy costs, rose 0.2 percent.

Companies like Levi Strauss & Co. and Jos. A. Bank Clothiers Inc. may find it difficult to keep raising prices as 12.7 million Americans remain unemployed, almost twice the number at the end of the last expansion. Less inflation would give the Fed room to keep interest rates near zero to spur the economic recovery and boost employment.

“The impact of energy prices will be relatively tepid going forward,” Millan Mulraine, a senior U.S. strategist at TD Securities in New York, said before the report. “For now it would seem that the inflation outlook remains fairly benign and favorable for the Fed.”

Stock-index futures held earlier losses after the figures as China reported slower-than-expected economic growth. The contract on the Standard & Poor’s 500 Index maturing in June fell 0.6 percent to 1,377.6 at 8:32 a.m. in New York.

Survey Results

Estimates from the 80 economists surveyed ranged from increases of 0.1 percent to 0.5 percent.

Consumer prices increased 2.7 percent in the 12 months ended in March, the smallest 12-month gain in a year.

The gain in the core gauge followed a 0.1 percent increase in February and also matched the median forecast of economists surveyed. Core prices were up 2.3 percent for the last 12 months, compared with 2.2 percent for the 12 months ended in February.

A 1.3 percent jump in the cost of used cars and trucks, the biggest since December 2009, contributed to the increase in the core measure, as did increases in clothing and medical care.

Today’s report showed energy costs increased 0.9 percent from a month earlier after jumping 3.2 percent in February. Food costs increased 0.2 percent, reflecting broad-based gains.

The costs of rents rose 0.2 percent, matching the total gain in the core measure.

Fed’s View

Federal officials, who have said energy costs will probably subside, have indicated they will hold off on more monetary stimulus unless prices rise more slowly than their 2 percent target or the economic expansion falters, according to the minutes of their March 13 meeting. Their preferred price gauge, issued by the Commerce Department and tied to consumer spending, rose 2.3 percent in the year ended in February.

“We expect this moderation of overall inflation to resume later this year,” Federal Reserve Bank of New York President William C. Dudley said this week.

Fuel prices have already started to stabilize. The cost of a gallon of regular gasoline at the pump eased to $3.91 on April 11 from a 10-month high of $3.94 reached a week earlier, figures from AAA, the biggest U.S. auto group, show.

Fed Vice Chairman Janet Yellen endorsed the central bank’s “highly accommodative” policy this week, stating the Fed probably won’t meet its goal of full employment for years while inflation will remain in check.

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