U.S. consumer prices rose at the fastest pace in six months in February, reflecting the rebound in the economy amid declining COVID-19 infections and the accelerating rollout of vaccines.
The Labor Department reported Wednesday that the consumer price index increased 0.4% last month after rising 0.3% in January. In the 12 months through February, the CPI surged 1.7%, the largest increase since February 2020.
Gasoline prices accounted for more than half of the rise in inflation, jumping 6.4%.
Economists are expecting the rise in prices to continue into the summer, pushing inflation past the Federal Reserve’s 2% target. But Fed officials do not believe the economy is in danger of overheating.
“Base effects and one-time price increases stemming from the reopening of the economy and some pass-through of higher prices from supply chain bottlenecks should lift core inflation to 2.5% in the spring,” said Kathy Bostjancic, chief U.S. financial economist at Oxford Economics in New York.
“However, the acceleration in inflation will be transitory and will not represent the start of an upward spiral,” she added.
After falling to nearly zero early in the pandemic, the rate of inflation is rising again as the economy rebounds, with higher costs of oil and emerging shortages of many key materials ranging from lumber to semiconductors putting additional pressure on prices.
“Global supply chains are still under heavy stress from the disruptions caused by the pandemic and companies can’t find everything they need at suitable prices to fill their needs,” MarketWatch noted.
Energy prices are now higher than they were a year ago and, according to MarketWatch, “They are likely to rise further in the months ahead as more Americans get back on the road or fly on airplanes.”
The cost of food rose 0.2% sequentially in February and 3.5% in the past year. Excluding the volatile food and energy components, the CPI edged up 0.1% after being unchanged for two straight months.
“Outside of rising energy costs, inflation pressures remained relatively tame in February,” said Jim Baird, chief investment officer of Plante Moran Financial Advisers.