By Mark Huffman
ConsumerAffairs.com
February 19, 2010
A day after
the government reported a huge spike in January prices at the wholesale
level, the Commerce Department said there was little sign of inflation in
the prices consumers paid last month.
The Consumer Price Index, a measure of retail prices, rose a modest 0.2 percent last month, fueled mostly by food and energy prices. But when volatile food and energy prices are removed from the equation, the "core" index actually went down by 0.1 percent, the first negative reading since December 1982.
Consumers paid more for energy last month, with fuel costs rising 2.8 percent, registering the largest one-month gain since last August. Much of that increase was in the form of gasoline prices, which rose sharply at the beginning of the year.
Despite the modest rise in consumer prices, Joel Naroff, chief economist for Naroff Economic Advisors, in Holland, Pa., is still wary of inflation, especially in light of the big jump in prices at the wholesale level.
"Food costs have begun to rise sharply as they too posted strong increases for the past four months," Naroff said. "While not surprisingly, the winter has not been kind to fruits and vegetables, the increases have also come in most proteins as well."
Naroff says soaring wholesale costs do not necessarily mean that consumer inflation will accelerate sharply as well. But he says it shows businesses have regained enough confidence in the economy that they feel they can implement long-delayed price hikes.
"That will likely mean a slow but steady rise in the Consumer Price Index, which cannot make the inflation hawks at the Fed particularly happy," he said.
In fact, as if on cue, the Federal Reserve Thursday raised the rate it charges banks for emergency loans, signaling what some economists say is the end of emergency "easy" money and the beginning of a series of rate tightenings, designed to tamp down inflation.
