US inflation hits fastest pace in 4 years
US consumer prices in January rose at their fastest pace in nearly four years, a fresh sign the economy may finally see faster inflation, the Labor Department reported Wednesday.
The consumer price index rose 0.6 percent, the third consecutive monthly acceleration and the largest increase since February 2013. The CPI also posted its largest 12-month increase in nearly five years, rising 2.5 percent compared to January 2016.
Almost half of the monthly increase was driven by rising fuel prices, with gasoline prices at the pump up nearly eight percent. The energy index also saw its largest 12-month gain since November 2011, adding nearly 11 percent.
Excluding the more volatile categories of food and energy, prices were up 2.3 percent year-over-year, nearly the same as the overall rate, while there was a 0.3 percent rise for the month.
The new figures may support the US central bank's expectation that it will need to tighten monetary policy about three times this year after a decade of near-zero interest rates.
US wholesale inflation, prices seen from the seller's perspective, likewise saw their largest monthly gain in more than four years, according to data released earlier this week.
Federal Reserve Chair Janet Yellen in congressional testimony on Tuesday reaffirmed that an increase in the benchmark lending rate was on the horizon and signalled they could come at any time.
He comments cemented the view among analysts and market players that another rate hike could happen as soon as the next Fed policy meeting March 14 and 15.
Within the CPI, prices for housing, clothing and new cars also rose.
"It is obvious that consumer prices have gained momentum in recent months," Chris Christopher, director of consumer economics at IHS Global Insight, said in a client note. "This is not the best thing in the world for lower income households living paycheck-to-paycheck."
Christopher said the uptick in prices, which followed a solid employment report in January, "increases the chances of a March hike."
In separate report, the Commerce Department said a steep drop in auto sales weighed on the US retail sector in January, putting downward pressure on total sales.
Consumers shelled out a total $472.1 billion in January, a 0.4 percent increase over the prior month. Auto sales, however, saw their sharpest decline in eight months, falling 1.4 percent. Excluding autos, the increase in retail sales for the month was twice as large at 0.8 percent.
Still, monthly sales were stronger than expected. Analysts had forecast growth of only 0.1 percent.
January was also considerably stronger than the same month last year, with sales up 5.6 percent higher.
However, Ian Shepherdson of Pantheon Macroeconomics said there was reason to doubt that trends in core consumer spending were accelerating.