WASHINGTON - U.S. consumer prices rose less than expected in January as the biggest drop in clothing costs in 11 years countered the effects of higher heating oil, gasoline, and tobacco prices, according to government data released Friday.
The consumer price index, the government's broadest measure of what people pay for goods and services, rose 0.2% in January, the same as in each of the three preceding months, the Labor Department said. The so-called core consumer price index, which excludes food and energy, also rose 0.2%, after a 0.1% rise in December.
January's CPI was 2.7% higher than in January 1999 and followed a 2.7% year-over-year increase in December, which had the slowest pace since 1965. The core CPI rose 1.9% in January compared with a year earlier.
"For all the sound and fury about inflation being around the corner, it just doesn't seem to show up," said Bill Cheney, chief economist at John Hancock Life Insurance Co. in Boston. "Intense competition and productivity are keeping the lid on things."
Analysts had expected a 0.3% increase in the overall CPI in January and a 0.2% rise in the core rate.
Separately, the Commerce Department reported that the U.S. trade deficit in goods and services narrowed in December as exports rose to a record. Even so, the 1999 trade gap also set a record. The December trade deficit was $25.5 billion, down from the record $27.1 billion in November (previously reported as $26.5 billion). Analysts had expected the December shortfall to equal the original November level.
About 55% of the CPI covers prices consumers pay for services, ranging from medical care to airline fares and movie tickets. Goods, ranging from food and clothing to autos and appliances, account for the rest.
While the core rate of consumer price inflation held at a 35-year low, Fed policymakers have raised interest rates four times, beginning last June, to slow the economy and contain incipient inflation.