Consumer prices in January rose 0.5%, up from 0.4% in December. For the past 12 months, overall inflation increased 3.0%, according to U.S. Bureau of labor Statistics.
The inflation level was hotter than the consensus estimates of 0.3% for January and 2.9% for the past 12 months expected by economists polled by Dow Jones. Excluding the volatile categories of food and energy, the consumer price index (CPI) rose 0.4% for the month and 3.3% for the past 12 months, also higher than economists expected.
The news sent the stock market down more than 400 points in early trading and the 10-year Treasury yield, a key factor determining mortgage rates, rose above 4.65%.
The cost of shelter went up 0.4% in January, accounting for nearly 30% of the monthly all-items increase. Energy prices rose 1.9%, led by gas prices jumping 1.8% during the month. Overall food prices rose 0.4%, with the cost of groceries climbing 0.5% and restaurant meals rising 0.2%.
Other categories increasing in price included insurance, recreation, used cars and trucks, medical care, communication and airline fares. Categories that decreased in January included apparel, personal care, household furnishings and operations.
Wells Fargo economists Sarah House and Michael Pugliese wrote on their Economic Indicator blog that the CPI for January showed that inflation remains a problem. Rising gasoline and fuel oil prices overshadowed a more temperate rise in energy services. Egg prices jumped by more than 15% for the month, leading food prices up 1.9% over the past year.
“Both the year-over-year rates of the headline and core CPI indices rose over the month,” House and Pugliese wrote. “Therefore, setting aside any issues over residual seasonality, today’s report offers more evidence of progress in lowering inflation stalling out.”
