US food prices push February inflation to 0.4%
United States consumer prices increased above forecasts in February pushed by the cost of energy and food which rose at its fastest rate for two years, according to the latest release from the US Labor Department.
The index climbed 0.4% in February double January's 0.2%, with core inflation which excludes food and energy, increasing by 0.2%. The data is extremely relevant since the US Federal Reserve is scheduled to meet next week to set interest rates, which currently stand at 5.25%. Energy prices had fallen in January but bounced back, with petrol prices rising and tipped to increase further as the spring driving season gets under way. Food prices rose 0.8% and energy prices increased 0.9% as cold weather ran down fuel inventories, pushing up prices. In the last three months food prices have grown at an annual rate of 6.1%. Meanwhile, recent news on layoffs, weaker stock prices, home sales and concerns about mortgage defaults appeared to be taking its toll on consumers' spirits. The Reuters/University of Michigan consumer sentiment index fell from 91.3 to 88.8. This was below expectations of analysts, who had expected a reading of around 90. At the same time, the Federal Reserve said that production at factories, mines and utilities rose by 1% in February, rebounding from a 0.3% drop in January. Much of the strength came from a 6.7% jump in utility production, as colder-than-normal temperatures boosted production by the largest amount since December 1989. This means that usage of industrial capacity expanded from 81.4 to 82% in February, when most analysts were forecasting a 0.6% and 81.5%.