MercoPress. South Atlantic News Agency

US February consumer prices flat; producer prices fall 0.6%

Strong drop in energy and fuel prices was decisive

United States Labour Department reported that the consumer price index was flat in February, though prices were 2.1% higher than a year ago. Core inflation - which strips away food and energy costs - saw a 0.1% rise.

Official figures also show that US producer prices, (wholesale prices of goods leaving the factory gate) seasonally adjusted fell 0.6% in February, the biggest fall since July.

The figures reinforce the Federal Reserve's view that low inflation will allow interest rates to remain low. On Tuesday, the Fed said it would keep interest rates at near-zero for an “extended period” in the absence of inflation.

Analysts said the weakness in the US economy had prevented retailers from charging more for their goods, while a rise in food costs had been offset by a fall in energy bills.
A weak recovery is expected to keep inflation low for the rest of the year.

The producer prices fall was attributed by the US Labour Department to a 2.9% drop in energy costs. Stripping out energy and food costs, core producer prices rose by 0.1% n February.

The 2.9% drop in energy costs represent a sharp reversal from January, when energy costs jumped by 5.1%. Gasoline prices dropped 7.4% after an 11.5% rise in January. Food prices rose 0.4% after rising by the same margin in January.

There was further encouraging data from the Labour Department on the state of the jobs market.

Weekly figures showed that the number of new applications for unemployment benefits fell, adding to the view that the labour market is continuing to stabilise.

An increase in hiring is still expected to be recorded in March, however.

The cautiously optimistic outlook was reflected in a slight increase in the Conference Board's index of leading economic indicators.

The index, which estimates future economic activity based on a range of factors, rose by 0.1%. That is down from the 0.3% rise seen in January.