Source: Bureau of Labor Statistics

Source: Bureau of Labor Statistics

By Jacob Passy

While this winter’s record-setting cold weather caused a big spike in the cost of electricity and natural gas, consumer prices barely increased in January.

The Consumer Price Index (CPI) for all goods and services increased by 1.6 percent last month according to the US Labor Department. The same muted uptick was also noted for goods and services excluding food and energy, known as the “core CPI.”

These figures met expectations, continuing a trend of 0.1 to 0.2 percent increases in inflation each month for a number of years. In December, the figure stood at 1.5 percent inflation. And for consumers, the lack of major price increases spelled good news.

“Unless you heat your home, it was a really good number,” said David Berson, chief economist at Nationwide Financial.

Gasoline prices dropped by one percent, but surges in home energy prices led to an overall 0.6 percent increase in energy. Electricity prices surprisingly grew a seasonally adjusted 1.8 percent, its biggest jump since March 2010. Fuel oil also spiked by 3.7 percent.

Another culprit for the energy index’s boost was the unadjusted 24.1 percent price bump for propane from this time last year. Over 12 million Americans use this gas for heating according to the Propane Education and Research Council, but this winter left many suppliers scrambling to provide gas, now at higher prices.

“When demand is high … we have to drive farther to get the product, and often wait in line with other trucks to do so,” said Simon Bowman, a spokesman for AmeriGas, the country’s largest propane provider.

Source: Bureau of Labor Statistics

Beyond energy, one sector that saw major gains was housing. Rents and home prices, calculated as owners’ equivalent rents, rose 0.2 percent. As housing starts fell for the second month in a row, people are now looing to buy vacant properties, pushing prices upward.

But the nation’s weather didn’t affect all industries so drastically. Despite one of the worst droughts in California’s history, food prices remained flat. Cereals and bakery products saw minimal gains, and prices for fruits and vegetables actually dropped.

Other goods and services that rose in price included medical care, which saw a 0.2 percent raise, and tobacco products, which posted a 0.7 percent gain – the largest since July.

Consumers found other good news in the prices of retail goods. Shoppers saw a 0.3 percent reduction in the cost of both new vehicles and apparel. Airfares also posted a decrease – this time a deep 2.2 percent – a reflection of the drop in gasoline prices.

Looking to the future, economists look to expect less dramatic increases in the volatile energy markets as the weather takes a turn for the warmer. And don’t expect these same spikes in heating costs next year.

“This winter has been worse than what we’ve been experiencing the past few years,” said Russell Price, senior economist for Ameriprise Financial. “[Propane] wholesalers will build up their inventories, so they’ll be ready for a repeat next year.”

But consumers can expect more of the same from the Federal Reserve. While the CPI is not the Fed’s main indicator for inflation, the lackluster rates this month point to the central bank continuing stimulus practices for the foreseeable future.