Friday, February 20, 2009

US inflation picks up in January

US inflation picks up in January
US consumer prices climbed in January, the first rise since July, after energy prices picked up.

The consumer price index rose 0.3% from a month earlier after dropping 0.8% in December, the US Labor Department said.

The rise in the cost of living was expected, but analysts said that price rises were unlikely to accelerate given the depth of the recession.

Consumer prices were unchanged over the past 12 months, the weakest reading since 1955.

Some analysts had been worried about the US entering a period of prolonged deflation, which can make a recession even worse.

Continued falling prices hit company profits hard as consumers put off purchases.

"I guess if anything, it's good news that it ticked up, not that we love inflation," said Terry Morris, senior equity manager at National Penn Investors Trust Company.

"I think it's better that it ticked up and that we're pointing away from deflation."

However, most analysts see little risk of a surge in prices. Annual inflation is now at zero compared with 5% just six months ago.

"We're not about to see core inflation trending higher. There is just too much weakness on the demand side," said Carl Lantz, a strategist at Credit Suisse in New York.

Energy prices rose 1.7% in January, driven mostly by petrol prices, but they are down 20.4% from January 2008.

Story from BBC NEWS:

Published: 2009/02/20 14:58:26 GMT

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