U.S. Consumer Prices Probably Rose at Slower Pace in January
By Joe Richter
By Joe Richter
Feb. 18 (Bloomberg) -- U.S. consumer prices rose at a slower pace in January, limited by a decline in energy costs that may help keep inflation in check, according to a survey of economists before a government report this week.
Consumer prices rose 0.1 percent after a 0.4 percent increase a month earlier, based on the median forecast of economists surveyed by Bloomberg News ahead the Labor Department's Feb. 21 report. Core prices excluding fuel and food rose 0.2 percent after a 0.1 percent gain, according to the survey median.
The consumer price readings, along with a report on leading economic indicators the same day, are likely to bear out Federal Reserve Chairman Ben S. Bernanke's forecast of moderate economic growth and declining inflation. Bernanke told Congress last week that that lower energy and commodity costs are lessening pressure on companies to raise prices on other goods.
``Inflation is very benign,'' Rajiv Gupta, chief executive officer of Philadelphia-based chemical maker Rohm & Haas Co., said in a interview Feb. 16. ``This is about as stable an environment as we have seen in the last three years.''
The consumer-price report is scheduled for release at 8:30 a.m. Feb. 21 in Washington. Estimates ranged from a 0.4 percent decline to a gain of 0.3 percent. Estimates of the rise in prices excluding food and fuel ranged from 0.1 percent to 0.3 percent.
The consumer-price report is also expected to show core consumer prices rose 2.6 percent in January from a year earlier, the same 12-month increase reported for December.
Gasoline Prices
Prices at the pump for regular gasoline fell to $2.17 a gallon last month, the lowest in more than a year, according to Energy Department figures.
Lower commodity costs and increased competition are encouraging companies to hold off on price increases. A report from the Labor Department last week showed prices paid to U.S. producers fell by the most in three months.
``The pricing pressures from our suppliers and also demands from our customers are such that we don't see big price increases,'' Rohm & Haas's Gupta said in an interview at the Business Council meeting in Naples, Florida.
Prices for steel sheet, the most common product used in cars and appliances, fell to a 16-month low in January, according to Purchasing Magazine.
Bernanke's Outlook
``There are some indications that inflation pressures are beginning to diminish,'' Bernanke told the Senate Banking Committee in Washington on Feb. 14. ``The monthly data are noisy, however, and it will consequently be some time before we can be confident that underlying inflation is moderating as anticipated.''
The Conference Board will report its leading indicators index rose 0.2 percent last month after a 0.3 percent gain, based on the median estimate of economists.
Economists forecast the economy to expand 2.7 percent this year, compared with 3.4 percent in 2006, based on the median estimate in a Bloomberg News survey taken Feb. 1 to Feb. 8.
Reports last week showing a decline in housing starts and slower gains in retail sales during January may give the Fed some comfort. Still, price declines are likely to be gradual, economists said.
Slower economic growth ``will take a little bit of pressure off of inflation,'' said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. ``We expect core inflation to drift ever so slowly lower as go through the year.''
Comfort Zone
Government figures earlier this month showed a core consumer-price gauge preferred by the Fed rose 2.2 percent in December from a year earlier, matching prior month's figure as the smallest since May. The index was still above the upper end of Bernanke's ``comfort'' range of 1 percent to 2 percent.
``The core inflation rate remains somewhat elevated,'' Bernanke said. ``If activity expands over the next year or so at the moderate pace anticipated by the FOMC, pressures in both labor and product markets should ease modestly.''
Oil and natural gas prices that have crept higher this month will keep the Fed on guard, economists including Steven Wood at Insight Economics LLC said.
Rents, which make up almost 40 percent of the core consumer-price index, have been a concern as less affordable home prices make renting more attractive. A category designed to track rental prices probably rose 0.3 percent in January, according to Drew Matus, a senior economist at Lehman Brothers Holdings Inc.
Fed Minutes
Also on Feb. 21, the Fed will issue minutes of its last policy meeting. At that meeting, on Jan. 31, policy makers voted unanimously to leave the benchmark rate at 5.25 percent, where it has been since June.
Economists said other reports this week will show labor markets remain resilient even as the economy slows. The Fed said tight labor markets are an inflation concern because companies could pass higher wages and salaries through to prices they charge for goods and services.
Figures from the Labor Department on Feb. 22 may show the number of Americans filing first-time claims for state unemployment benefits fell to 325,000 in the week ended yesterday from 357,000 the prior week.
Bloomberg Survey
Date Time Period Indicator BN Survey Prior
02/21 8:30 Jan. Consumer Price Index 0.1% 0.4%
02/21 8:30 Jan. CPI Ex-food & energy 0.2% 0.1%
02/21 10:00 Jan. Leading Indicators 0.2% 0.3%
02/22 8:30 Feb. 17 Initial Jobless Claims 325K 357K
02/22 8:30 Feb. 10 Continuing Claims 2510K 2560K
To contact the reporter on this story: Joe Richter in Washington jrichter1@bloomberg.net
http://www.bloomberg.com/apps/news?pid=20601068&sid=aUWHHcxibVNU&refer=economy
