Washington - Falling energy prices helped keep overall consumer prices steady in January, the U.S. Labor Department said Tuesday in a report that suggested a rosy inflation outlook for a robust U.S. economy.
The consumer price index was unchanged in January on a seasonally adjusted basis, the first time the index was unchanged since January 1994, giving the world's biggest economy an inflation rate of just 1.6% over the last 12 months, the Labor Department said.
"Overall it's the same very benign inflation outlook that we've been experiencing for quite some time," said Kim Rupert, senior economist at Standard & Poor's MMS.
Much of the reason the index did not change was that energy prices fell 2.4%, the biggest drop in fuel prices since a 2.6% decline in March 1991.
Excluding volatile energy and food prices, consumer prices rose a scant 0.2% in the month.
The data was in line with expectations of Wall Street analysts, who were looking for only a small change, if any, in consumer prices in January.
There was only a muted market reaction to the data, with traders saying they were more concerned by comments by Federal Reserve Chairman Alan Greenspan, who later Tuesday morning began delivering his twice-yearly testimony on the state of the economy and employment to Congress.
The benchmark 30-year Treasury bond initially rose after the report, but then reversed course and was off 13/32, or $4.0625 on a $1,000 bond. Its yield, which moves inversely to price, climbed to 5.93% from 5.90% at Monday's close.
Greenspan described the U.S. economy as "finely balanced" but warned of threats, both on the domestic inflation front and from Asia's continuing economic turmoil.
The Fed chief was expected to come under intense questioning by members of a House Banking subcommittee about why the central bank was holding interest rates steady instead of lowering them in the face of such a benign inflation outlook.
Many economists believe cheaper imports from Asia, which has been hit by currency devaluations and economic slowdowns in recent months, will help keep the lid on inflation in the United States even with unemployment at its lowest levels in decades.
The January report was based on a revised basket of consumer goods that the department uses to measure price changes. The new survey, used for the first time last month, gives greater weight to some old items, such as transportation, and adds new categories, such as computers and cellular phones, to reflect changes in consumer spending habits.
The changes in the way the CPI was calculated appeared to have little effect on the overall index, Bureau of Labor Statistics economist Patrick Jackman said.
"This particular month it appears to have virtually no effect," he said. "We've recalculated the old index with the current prices, and the unadjusted figures for the old index are the same as the regular CPI."
The main reason the two indexes were virtually the same was because prices in general change so little, he said.
"Differential weights are not going to have a very large impact when you have very small price changes," Jackman said.
Food and beverage prices were up a seasonally adjusted 0.3% in January even though beef, pork and poultry prices were down. But fresh vegetables were up 7.9%. Housing was up a scant 0.1%, while clothing prices fell by 0.5%.
Transportation costs declined 0.3%, matching a 0.3% decline in December. Airline fares, however, rose 2.7% in January, the department said, while tobacco products gained 0.7%, up 7.4% over a year ago.
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