US consumer prices rose 0.2 per cent in February

WASHINGTON – U.S. consumer prices rose 0.2 per cent in February, pushed up slightly by higher gasoline and housing costs even as the prices for autos and clothing slumped.

The Labor Department said Tuesday that the consumer price index rose a modest 1.5 per cent last month from a year ago.

Inflation has been muted despite the solid job market, causing average hourly earnings — after being adjusted for consumer prices — to climb 1.9 per cent in the past year. This marks the strongest inflation-adjusted wage growth since November 2015, an increase that would likely help consumer spending and economic growth.

The low level of inflation also gives the Federal Reserve more flexibility in holding off on further increases to a key short-term interest rate, enabling the U.S. central bank to provide support for economic growth.

Some economists expect inflation to pick up as the benefits of higher wages flow through the economy.

“Although inflation has slowed in recent months, it should move gradually higher in the spring and summer,” said Gus Faucher, chief economist at PNC Financial Services. “Higher energy prices will push up overall inflation, and rising wages will lead businesses to raise prices in an effort to maintain profit margins.”

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the consumer price index could breach 2.5 per cent by the end of the year, which could create a problem for the Fed if holds rates at their current level for 2019.

Still, even with modest inflation, many Americans are already facing higher prices for basic necessities. Housing costs continue to outpace overall inflation, rising 3.4 per cent from a year ago. School tuition and child care costs have increased 3 per cent over the past 12 months. Food prices jumped 0.4 per cent in February.

Gasoline prices surged 1.5 per cent in February, but they’re 9.1 per cent lower from last year. Clothing prices plunged 1 per cent in February, while new-auto prices slipped 0.2 per cent.

Excluding the volatile energy and food categories, core prices increased 0.1 per cent in February and 2.1 per cent from a year ago.