By Mark Huffman
ConsumerAffairs.com
March 18, 2009
While consumers are coping with a tanking economy, they may also have to deal with a rising cost of living.
The U.S. Labor Department reports the Consumer Price Index, a measure of goods and services at the retail level, rose 0.4 percent in February, adding to a 0.3 percent rise in February.
Much of the increase can be attributed to gasoline prices, which have been climbing again since the beginning to 2009. The so-called "core" rate of inflation, which excludes food and energy costs — was up a more modest 0.2 percent.
So far this year the nation's annualized inflation rate is running just under two percent, well within the Federal Reserve's projections. The Fed's larger concern, at this point in the recession, is that prices actually might fall, setting off a downward spiral of deflation.
Bloomberg News reported the 0.4 percent inflation rate was slightly higher than economists had expected. It says its survey of 71 economists predicted a 0.3 percent rate in February. Joel Naroff, chief economist for Naroff Economic Advisors, in Holland, Pennsylvania, says it's much too early to be worrying about inflation.
"We are in a major recession so worrying about inflation should be left to the perpetually perplexed," Naroff said. "Maybe by the fall, if the economy is showing signs of coming out of it, we might have reason to start asking whether inflation will be an issue, but not now."
Consumers paid quite a bit more for energy last month, led by an 8.3 percent increase in gasoline prices. Fuel prices rose despite falling world oil prices and U.S. refineries ran at only 80 percent of capacity, preventing an oversupply of gasoline that would drive down prices.
In good news for consumers, food prices actually declined in February, falling 0.1 percent. It was the first drop in food prices since April 2006.
Consumers who felt confidently enough to take a vacation found cheaper air fare and hotel rates in February. Some warm weather resorts, which normally are booked solid in February, found they had to slash prices in order to entice visitors.
