U.S. Consumer Prices Probably Rose as Food, Fuel Costs Climbed

U.S. Consumer Prices Probably Rose as Food, Fuel Costs Climbed

March 14 (Bloomberg) -- U.S. consumer prices probably increased in February as food and fuel expenses climbed, a government report today may show.

The cost of living rose 0.3 percent last month following a 0.4 percent gain in January, according to the median forecast of 81 economists surveyed by Bloomberg News. A separate report may show consumer sentiment dropped to a 16-year low in March.

Inflation, falling home values and mounting job losses have shaken Americans, leading to cutbacks in spending that signal the economy may already be in a recession. Concerns over growth will dominate for now, causing the Federal Reserve to again lower the benchmark interest rate next week even as prices rise.

``The Fed will continue to worry more about the economy and the prospect of a deeper recession than about inflation,'' said Sal Guatieri, senior economist at BMO Capital Markets in Toronto. ``The price increases won't change the dynamic for Fed policy'' next week.

The Labor Department's consumer-price report is due at 8:30 a.m. in Washington. Survey forecasts ranged from a gain of 0.1 percent to 0.5 percent. Prices probably jumped 4.3 percent from a year earlier for a second consecutive month.

Excluding food and fuel, so-called core prices probably rose 0.2 percent in February after a 0.3 percent gain the prior month, according to the survey median.

The Reuters/University of Michigan preliminary index of consumer sentiment probably fell to 69.3 this month, the lowest since 1992, from 70.8 in February, according to the median estimate.

Record Oil

Inflation is likely to accelerate as fuel costs continue to climb. Crude oil on the New York Mercantile Exchange exceeded a record $110 a barrel this week. The average cost of regular gasoline climbed to a record $3.27 a gallon on March 12, according to AAA.

``Further increases in the prices of energy and other commodities in recent weeks, together with the latest data on consumer prices, suggest slightly greater upside risks to the projections of both overall and core inflation than we saw last month,'' Fed Chairman Ben S. Bernanke told Congress in February.

He also cited a ``distinctly less favorable'' economic outlook, signaling policy makers are more focused on growth.

Investors project the central bank will lower the benchmark rate by three-quarters of a percentage point by the end of their next meeting on March 18, according to futures trading.

Airlines are among companies trying to pass on higher fuel costs to customers. United Airlines, the world's second-largest carrier, on March 7 increased fuel surcharges on U.S. fares by as much as $10. American Airlines and Delta Air Lines Inc. followed with similar moves.

Milk, Wheat

Revenue at Kroger Co. rose 2.2 percent last quarter, the Cincinnati-based company said this week. The biggest U.S. grocery chain charged customers more to compensate for price increases by Kraft Foods Inc. and General Mills Inc. that reflected rising milk and wheat expenses.

``We don't think it's abating at this point in time,'' Kroger's Chief Executive Officer David Dillon said, referring to the price increases, on a March 11 conference call with analysts. Kroger, which also sells furniture, clothing and jewelry, said profit fell as sales of higher-priced items suffered.

The CPI is the government's broadest gauge of costs because it includes goods and services. The Labor Department will issue its report on wholesale prices next week.

BLOOMBERG