WASHINGTON (AP) — The cost of producing goods and
services in the United States rose slightly in January, with higher food
prices partly offset by cheaper gas. Overall, inflation remains mild.
The
Labor Department said Wednesday that the producer price index, which
tracks prices before they reach consumers, rose 0.2 percent in January.
That followed a 0.1 percent increase in December and a flat reading in
November. In the past year, producer prices have risen just 1.2 percent,
below the Federal Reserve’s preferred target rate.
Excluding the cost of food, energy and markups by wholesalers and retailers, so-called core prices ticked
up just 0.1 percent.
Producer
prices remain "rather modest, a sign that underlying inflationary
pressures are very modest," Annalisa Piazza, an analyst at Newedge
Strategy, said in a note to clients.
January’s producer prices are
the first to be compiled since the government revamped its index to
make it more comprehensive. Producer prices now include services and
construction. Before last month, the index tracked only goods.
That
change has doubled the producer price index’s coverage to include 75
percent of the economy. It is the government’s first revamp of the index
in 35 years.
Inflation has declined in the past two years, posing
a challenge for Fed policymakers. During 2013, the producer price index
rose just 1.1 percent after rising 1.4 percent in 2012. Both figures
are far below the Fed’s 2 percent target.
Businesses have
struggled to raise prices because of a tight job market and meager wage
growth. Consumers have found it hard to pay more or demand higher wages.
Low inflation has enabled the Fed to pursue extraordinary stimulus programs to try to boost economic
growth.
The
Fed is now trying to unwind some of that stimulus. It cut its monthly
bond purchases to $65 billion this month, from $75 billion in January
and $85 billion last year. The bond purchases are intended to keep
long-term interest rates low to encourage borrowing and spending.
But
Fed policymakers have expressed concern about the persistence of low
inflation. If inflation remains below its target, the Fed could extend
its stimulus efforts.
___
Follow Chris Rugaber on Twitter at http://Twitter.com/ChrisRugaber
Copyright 2014 The Associated Press. All rights
reserved. This material may not be published, broadcast, rewritten or
redistributed.