NEW YORK (CNN/Money) -
Consumer prices rose at the fastest pace in nine months in January, the government said Friday, but there were few signs of a broad pickup in inflation despite a big jump in wholesale prices.
The Labor Department said its consumer price index, the government's main inflation gauge, rose 0.3 percent in January, matching forecasts from analysts surveyed by Briefing.com. It was the biggest rise since last April but came mostly from energy costs, which jumped 4 percent due to cold winter weather in the United States and worries about a U.S. war with Iraq.
The so-called core-CPI, which excludes often-volatile food and energy prices, edged up 0.1 percent, a shade below forecasts. The department said food prices edged down 0.2 percent and clothing prices fell 0.9 percent.
The CPI follows Thursday's government report showing the producer price index, a measure of wholesale prices, jumped 1.6 percent in January, the biggest increase in 13 years.
Thursday's report raised concerns among some economists about the risk of stagflation, when inflation picks up sharply but there is little or no economic growth. Friday's report suggested that risk is still remote, at least for now.
"I would interpret those numbers as being quite benign in light of what we saw as very, very steep increases at the wholesale level," Richard DeKaser, chief economist of National City Corp., told CNN Money Morning. "Very little of that [wholesale price increase] has leaked through to the consumer price level. That's testament to the pricing pressure across America at the retail level."
But DeKaser said he doesn't believe consumer prices can stay low if wholesale prices continue to climb, adding that prices on store shelves may start to creep higher this spring.
Other economists agreed, noting energy prices could keep rising, at least until the situation in Iraq is clearer.
"The looming war is boosting oil prices. That is feeding through to gasoline. But energy prices really only started to accelerate sharply toward the end of January," David Sloan, senior economist at 4Cast Inc., told Reuters. "So the boost to the February CPI should be quite sharp. In January, the effect was more modest but still noticeable."
But other analysts said that outside of energy there were few signs of growing inflationary pressure.
"But there really is no pressure on the core," Ram Bhagavatual, chief economist at Royal Bank of Scotland Financial Markets in New York, told Reuters. "Energy marches to its own drum and the core stays fairly steady."
A pickup in inflation would complicate efforts by policy-makers at the Federal Reserve to use lower interest rates to spur growth. The central bank's mandate is to keep the economy growing but also to keep inflation under control.
On Wall Street, stocks initially showed little reaction to the report, but later moved higher in afternoon trading. Treasury bond prices were mixed.
In its report, the department said the drop in food prices was the biggest since January 1997. Even medical care costs, which have been rising sharply, grew just 0.1 percent -- the smallest rise since January 1998.
Housing prices, which make up more than 40 percent of the CPI, rose 0.4 percent, offsetting weakness in many of the other core components.
Within the energy segment, fuel oil costs spiked 8.6 percent, natural gas climbed 4.6 percent and gasoline prices jumped 6.6 percent.
During the past 12 months, the CPI has risen 2.6 percent overall and 1.9 percent excluding food and energy.
-- from staff and wire reports