The Consumer Price Index rose 0.5 percent in February, the largest increase since June 2009, the Labor Department said Thursday. Core prices, which exclude food and energy, rose only 0.2 percent, matching January’s gain.
Gas prices jumped 4.7 percent in February, above January’s increase but below December’s rise. Oil and gas prices have risen sharply since the beginning of the year due to political turmoil in the Middle East.
Food costs increased 0.6 percent, the most since September 2008. Food costs rose for almost all major grocery store groups, including meat and eggs, dairy, and fruits and vegetables. The cost of cereals and baked goods was flat, the only group that didn’t increase.
Bigger food and gas bills may limit Americans’ ability to buy discretionary goods, and that could hamper economic growth. Rising raw material costs are also reducing profit margins at some companies.
There are also concerns that inflation could spread. New car prices also jumped 1 percent, and airline fares and medical care costs rose. Clothing costs dropped 0.9 percent, after a sharp rise in January.
Despite those gains, economists said there is little sign that price increases outside of food and energy will get out of hand.
“High unemployment and modest wage gains should continue to keep a lid on … inflation,” said Sal Guatieri, an economist at BMO Capital Markets.
Some companies are starting to pass on higher raw materials costs to consumers. Kimberly-Clark Corp. said Thursday that it is raising prices on its Huggies diapers, Cottonelle toilet paper and other child care products. The move is intended to offset higher costs for wood pulp and oil.
Other companies are reporting lower profits due to higher commodity costs. FedEx Corp. said Thursday that earnings fell 3 percent in the December-February quarter because of rising fuel prices and bad winter weather. The drop occurred even though the package delivery company also raised prices to offset oil costs.
Prices for many agricultural commodities, including corn, wheat and soybeans, have doubled since last summer due to bad weather around the globe. Those higher prices are now showing up on store shelves. Vegetable prices also soared last month due to harsh winter freezes in southern U.S. states.
More food and gas price increases are in the pipeline. The Labor Department said Wednesday that wholesale prices jumped 1.6 percent in February, the largest increase since June 2009. Wholesale food prices rose 3.9 percent, the biggest increase since November 1974.
Prices for other goods and services are recovering from very low levels. Core consumer prices increased 1.1 percent in the past year, up from a 0.6 percent annual increase in October. Still, that’s below the Fed’s preferred range of 1.5 percent to 2 percent.
Overall prices are up 2.1 percent in the past year, the report said.
The Federal Reserve said this week that more expensive food and energy is “currently putting upward pressure on inflation.” But the central bank said the pressures are likely to be temporary. It also said that measures of underlying inflation have been subdued, a reference to core prices.