Fuel prices spark monthly inflation
The cost of gasoline and heating fuels spiked last month, driving the biggest monthly jump in inflation in nearly a year, the Labor Department reported yesterday.
With bitter cold gripping much of the nation, and OPEC holding the line on oil production, energy prices posted their biggest jump since the run-up to the Iraq war last year. That pushed up the consumer price index, a popular measure of inflation, by 0.5 percent. The jump was more than twice the monthly increase in December, and the biggest rise in the index since February 2003.
Still, economists said there was no need to fear a return of rapid inflation.
Even with the energy surge, inflation over the past year ran at a very tame 1.9 percent.
When energy and food prices are removed from the calculations, the so-called core inflation rate over the year was 1.1 percent, the lowest in more than 40 years.
Economists tend to discount volatile food and energy costs when assessing inflation because the prices can swing wildly from month to month. The Federal Reserve takes a similar view, and yesterday's report is unlikely to change the Fed's stance on holding short-term interest rates low, economists said,
"You hate to come off as a callous economist because people have to pay their heating bills, but these energy prices don't matter to underlying inflation," said Bill Cheney, chief economist at John Hancock Financial Services. "This is more of the same as far as the Fed is concerned: The economy's growing but we're not getting any jobs or inflation, so they can wait on interest rates."
Consumers certainly paid higher heating bills. Energy prices leaped 4.7 percent in January -- compared to 0.3 percent in December -- and were up 7.8 percent from a year earlier. In Boston, which experienced one of the coldest Januarys on record, the year-over-year increase was even worse: 8.2 percent, the Labor Department said.
Overall, inflation over the past year ran at 4.3 percent in Boston, more than twice the national average.
Average heating oil prices in Massachusetts jumped 10 percent in January, to a peak of $1.61 per gallon from $1.46 at the end of December and $1.48 a year earlier, according to the state Division of Energy Resources. About 40 percent of Massachusetts homes heat with fuel oil.
The good news is that heating fuel costs appear to be declining. The average state fuel oil price slid 5 cents per gallon, to $1.56, over the past few weeks, and now stands substantially lower than the same period in February 2003, when the average was at $1.75 and rising, according to the Division of Energy Resources.
Robert Gavin can be reached at rgavin@globe.com.
