WASHINGTON (AP) - Consumers paid more in January for everything from food and gas to airline tickets and clothing. The price increases reflect creeping but still-modest inflation.
The Consumer Price Index rose 0.4 percent last month, matching December's increase, the Labor Department said Thursday. Over the past year, the index has risen 1.6 percent.
Core prices, which exclude volatile food and energy costs, rose 0.2 percent. That's the largest monthly increase in more than a year. Over the past 12 months, core prices have increased 1 percent. This is more than December's 0.8 percent annual pace, but it remains well below the Federal Reserve's comfort zone for inflation of between 1.5 percent and 2 percent.
Food prices climbed 0.5 percent in January, the most in more than two years. Still, food costs in the U.S. are still tame compared with the raging inflation in many developing countries. Those countries are more vulnerable to steep rises in the prices of corn, wheat, coffee and other commodities.
Other reports Thursday showed:
- More people are applying for unemployment benefits. Applications rose last week to a seasonally adjusted 410,000, the Labor Department said. The increase follows a week when applications fell to their lowest level in nearly three years. But that decline was due partly to snowstorms that closed some government offices and kept people from applying for benefits.
- Fewer homeowners are falling behind on their mortgages. The Mortgage Bankers Association said 8.2 percent of homeowners missed at least one mortgage payment in the October-December quarter. That's down from 9.1 percent in the previous quarter and a high of more than 10 percent in the January-March quarter. But foreclosures are still rising.
- The average rate on a 30-year fixed mortgage dipped to 5 percent this week from 5.05 percent, according to Freddie Mac. The average rate had reached a 40-year low of 4.17 percent in November.
- A private research group's gauge of future economic activity rose a slight 0.1 percent in January, much less than in recent months. Still, the rise in the Conference Board's index of leading economic indicators was the seventh straight monthly advance.
The report on consumer prices showed that some companies are trying to pass on higher prices for oil, cotton and agricultural products. In January, a measure of wholesale inflation rose at the fastest pace in more than two years.
But high unemployment and weak wage increases are limiting the ability of many retailers to raise prices.
"With the unemployment rate still at 9 percent, there will be plenty of downward pressure on underlying prices, and so we don't expect core inflation to trend upwards," said Paul Ashworth, an economist at Capital Economics.
Yet many food companies are raising prices in response to a jump in the cost of raw materials. Corn prices have doubled in the past six months. Prices for wheat and soybeans have also risen sharply.
Bad weather has damaged harvests in Russia, Australia, Argentina and elsewhere. At the same time, rapid growth in developing countries is raising demand for a range of commodities, pushing up prices.
Global food prices have risen 29 percent in the past year, according to a World Bank report Tuesday. They are just 3 percent below the all-time peak reached in 2008.
Higher food prices are pushing overall inflation up in developing countries and contributing to political unrest. China said Tuesday that consumer prices rose 4.9 percent in January, driven by a 10.3 percent jump in food costs. Rising food prices led to five days of riots in Algeria last month that left three people dead.
The impact has been much smaller in the United States. Americans spend a much smaller proportion of their budgets on food - about 14 percent, compared with 40 percent to 50 percent overseas.
And commodity costs make up a smaller portion of food prices. Transportation, processing and packaging account for a much larger chunk, said Kurt Karl, chief U.S. economist at Swiss Re. That means big swings in grain costs have less effect at U.S. grocery stores.
In developing countries, people are more likely to buy raw commodities and prepare basic foods such as bread at home, Karl said. And as people in poorer countries spend more on food, they are more likely to push for higher wages to cover those costs. That leads companies to raise prices further, pushing inflation higher in a vicious cycle.
Central banks in some countries, including China and Brazil, are taking steps to thwart inflation, such as rising interest rates. That could slow their economic growth and cut into U.S. exports.
Fed officials unanimously concluded late last month that inflation isn't yet a problem in the U.S., according to minutes from their January meeting. The central bank anticipates that inflation won't exceed 1.7 percent this year.
Still, many prices are starting to rise. The cost of clothing climbed 1 percent in January, as companies sought to offset the rising price of cotton.
Airline fares increased for the fifth month in a row, rising 2.2 percent. Airlines are paying about 50 percent more for fuel than they did a year ago. They have raised fares or fuel surcharges on leisure travelers five times since December.
Gas prices rose 3.5 percent in January.
The cost of housing, which makes up about 40 percent of the core index, rose 0.1 percent, reflecting increases in rents.
Some goods and services are getting cheaper. New and used car prices fell. Hotel prices dropped 1 percent. Computer and technology equipment costs fell 0.8 percent.