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Inflation Mild in February, Report Says

From Reuters

U.S. inflation was tame and home building slowed in February, and mid-Atlantic factory activity eased this month, according to data released Thursday.

The consumer price index edged up 0.1% in February as energy prices fell, the Labor Department said. The core rate, which excludes food and energy costs, also rose 0.1%.

The Commerce Department said housing starts, completions and building permits all dropped in February. That suggested a moderation in the market after a five-year boom.

The Philadelphia Federal Reserve Bank said its gauge of factory activity in the mid-Atlantic region fell to 12.3 in March from 15.4 in February, signaling a sharper slowing than Wall Street had expected.

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Analysts said the reports pointed to an economic expansion that was neither too hot nor too cold, and they said the Federal Reserve might soon be able to wrap up a rate hike campaign it started in June 2004.

“The housing market is cooling off but not too much, and inflation looks relatively benign,” said Gary Thayer, chief economist at A.G. Edwards & Sons in St. Louis. “It suggests that the economy is on a healthy growth path. These numbers look as if there’s no urgent need to raise interest rates much further.”

Fed policymakers are expected to bump benchmark rates up a quarter percentage point to 4.75% at their next meeting on March 27 and 28.

Energy prices decreased a sharp 1.2% in February, and food prices advanced just 0.1%. But even outside those often-volatile areas, price increases were mostly moderate.

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Over the last 12 months, consumer prices rose 3.6%, marking a deceleration from the energy-led 4% gain in the 12 months ended in January. The 12-month change in the core index held steady at 2.1%.

The drop in energy prices helped workers keep pace with inflation. The Labor Department said inflation-adjusted weekly earnings were flat last month and down 0.1% over the last year.

The Philadelphia Fed’s factory survey also offered upbeat inflation news as the measure of prices paid by manufacturers fell sharply in March to its lowest level since August 2003.

In its report, the Commerce Department said housing starts dropped 7.9% in February to a 2.12-million-unit annual pace from an upwardly revised 2.3-million-unit rate in January.

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The Labor Department also said new claims for unemployment benefits unexpectedly edged up by 5,000 last week to 309,000, the highest level of the year. That pushed a four-week moving average of claims, which offers a better view of underlying trends, up by 2,750 to 296,500. Although the average is at its highest level since mid-January, it still suggests a robust labor market.


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