Increase in food costs pushes producer prices up slightly in January


WASHINGTON — U.S. producer prices edged up slightly in January as the biggest rise in food costs in eight months offset a further decline in energy prices. The tiny overall increase indicated that inflation pressures remain modest.

FILE - In this Wednesday, Feb. 3, 2016, file photo, Wendell Downing works on a tank to hold sap to be boiled into maple syrup at Limlaw Family Maple Farm in West Topsham, Vt. On Wednesday, Feb. 17, 2016, the Labor Department reports on U.S. producer price inflation in January. (AP Photo/Lisa Rathke, File)

The Labor Department said Wednesday that its Producer Price Index rose 0.1 percent in January after having fallen 0.2 percent in December. Over the past year, the PPI, which measures inflation pressures before they reach the consumer, is down 0.2 percent.

Core inflation, which excludes energy and food, rose 0.4 percent in January, the biggest one-month jump in 15 months. Over the past 12 months, core inflation is up 0.6 percent.

A big drop in energy prices in the past two years and a strong dollar have combined to keep inflation low.

Jennifer Lee, senior economist at BMO Capital Markets, said the increase in core prices at the wholesale level could attract attention at the Federal Reserve, where a number of officials have said they will be watching for signs of higher inflation in determining when to raise a key interest rate again.

The Fed raised the rate in December for the first time in seven years but held off boosting rates in January.

The Fed has said further increases will depend on seeing movement toward achieving the Fed’s goal of annual price increases of 2 percent. The Fed believes that is the optimal level for inflation and readings below that target raise concerns about the potential threat of deflation.

Inflation pressures at the consumer level have also been low. For all of 2015, consumer prices were up just 0.7 percent, the smallest annual increase in seven years.

For January, energy prices fell 5 percent, reflecting big drops in all types of energy. Gasoline prices were down 8.8 percent. The nationwide average for a gallon of gas now stands at $1.71, 55 cents lower than a year ago, according to AAA.

Food costs jumped 1 percent in January with big increases in the cost of fish, beef and vegetables.

In other economic reports Wednesday:

The Commerce Department said cold weather appears to have cut into home construction as housing starts slipped 3.8 percent last month to a seasonally adjusted annual rate of 1.1 million homes.

A sharp 12.8 percent decline in construction in the Midwest and a 3.7 percent dip in the Northeast propelled the broader decrease, with construction also falling in the South. It was nearly unchanged in the West.

The Federal Reserve said manufacturing output rose 0.5 percent in January, after falling in four of the previous five months. The increase was the biggest since July.

Overall industrial production, which includes mining and utilities, added 0.9 percent, the biggest jump in 14 months.