Inflation Slowed Sharply in February

WASHINGTON (AP) -- Inflation slowed sharply in February as food costs moderated and the price of gasoline, natural gas and other energy products posted big declines.þþThe Labor Department reported Thursday that its closely watched Consumer Price Index posted a tiny 0.1 percent increase last month after having jumped 0.7 percent in January. The slowdown in price pressures was certain to be welcomed at the Federal Reserve, which has been boosting interest rates since June 2004 to make sure inflation does not get out of control.þþIn other economic news, the number of Americans filing claims for unemployment benefits edged up to 309,000 last week, an increase of 5,000 from the previous week. Even with the slight increase, analysts said the level of claims was still signaling a strong labor market.þþThe third consecutive rise in jobless claims pushed them to the highest point in 11 weeks. However, analysts said they still remain at a level that shows the labor market has rebounded from the blows delivered last year by the Gulf Coast hurricanes and surging energy prices.þþThe government reported last week that 243,000 new jobs were created in February, the strongest gain in three months, as hiring picked up around the country. Analysts are forecasting similar strong job gains in coming months.þþIn a third report, the Commerce Department said that construction of new homes and apartments declined by 7.9 percent in February to a seasonally adjusted annual rate of 2.12 million units, another sign that the nation's five-year housing boom is slowing.þþAnalysts expected the February slowdown after housing surged by 15.8 percent in January to the fastest pace in more than three decades, reflecting unusually warm weather during the month.þþBuilding permits, seen as a good indicator of future activity, also fell last month, dropping by 3.2 percent to a seasonally adjusted annual rate of 2.145 million units, as home builders reacted to recent declines in home sales and rising mortgage rates.þþBy region of the country, construction fell in all regions of the country except the West, which saw an increase of 7.9 percent last month. The biggest setback occurred in the Northeast, where building activity fell by 23.5 percent, reflecting last month's major snowstorm. Housing construction was down 11.2 percent in the South and 10.4 percent in the Midwest.þþEven with the moderation in inflation, the inflation-adjusted weekly earnings of non-supervisory workers fell by 0.1 percent in February after a decline of 0.4 percent the previous month.þþThe CPI report showed that energy prices dipped by 1.2 percent last month after a big 5 percent increase in January. The moderation reflected a 1 percent drop in gasoline pump prices, a 2.8 percent fall in home heating oil costs and a 4.5 percent drop in the price of natural gas, which was the biggest decline in more than four years.þþThe gains in food prices also slowed in February to an increase of 0.2 percent, compared to a 0.5 percent jump in January. Vegetable, poultry and dairy prices all fell, helping to offset increases in the price of fruit and pork.þþOutside of the volatile energy and food sectors, so-called core inflation was also well-behaved during February, rising by a slight 0.1 percent, after a 0.2 percent gain in January.þþThe Federal Reserve has been pushing up interest rates since June 2004 to make sure that faster economic growth does not spawn unwanted inflation. Many economists believe that the central bank will push its target for the federal funds rate, the interest that banks charge each other, up by another quarter-point to 4.75 percent at its next meeting on May 27-28.þþThe Fed has been able to stick to a string of gradual quarter-point increases because inflation pressures outside of energy have remained well contained.þþIn its latest survey of economic conditions around the country, the Fed said Wednesday that businesses seemed to be coping with high energy prices and rising costs for some construction materials such as cement and lumber.þþOutside of food and energy, clothing costs posted a big 1 percent decline last month, the biggest one-month drop in nearly five years.þþThe cost of new cars edged up a slight 0.1 percent last month although the price of airline tickets shot up by 1.2 percent as airlines continued to boost fares to deal with soaring fuel costs.þþ