BUSINESS
02/17/2011 09:53 am ET Updated May 25, 2011

Consumer Price Index: Food Fuel, Prices Drive Up Costs For Consumers In January

Higher food and energy prices pushed up the consumer price index for January according to government figures released today.

The index, the most closely watched measure of inflation, increased 0.4 percent in January, the Labor Department said. Over the past 12 months, prices increased 1.6 percent before seasonal adjustments.

Food prices increased by 0.5 percent in January, the biggest jump since high food prices sparked riots around the world in September 2008.

Energy prices increased for the seventh month in a row, rising by 2.1 percent over the past month, according to the figures released by the Bureau of Labor Statistics.

"The increase was stronger than expected," said Sal Guatieri, senior economist at BMO Capital Markets. Clothing prices, especially, jumped an unexpected 1 percent, he said. "The good news is it looks like we're reached bottom of inflation, which has abated deflation risks," said Guatieri. "The bad news is higher prices will drain purchasing power," with groceries and gas taking up cash that would otherwise be used for other purchases, he explained.

But, said Guatieri, retailers and wholesalers would still absorb most of the cost of commodity increases. With unemployment so high, they weren't likely to attempt to charge prices most people couldn't afford.

The cost of clothes, shelter, airline fares and recreation rose as well. The only items tracked by the index not to show an increase were new and used motor vehicles.

Prices for commodities, ranging from copper to corn to cotton, have surged in recent months. As a result, food prices around the world hit record highs. The increase in commodity prices is filtering down to consumers.

The Consumer Price Index tracks changes in the cost of a virtual basket of goods for urban consumers.