U.S. core consumer prices rose at their quickest pace in more than a year in January, but the increase was not strong enough to suggest a troubling build-up in inflation pressures.
The Labor Department said on Thursday its core Consumer Price Index, excluding food and energy, increased 0.2 percent — the largest gain since October 2009. The index rose 0.1 percent in December.
The increase in the core rate, which was above economists' expectations for a 0.1 percent gain, was driven by rises in the cost of apparel, shelter and airline fares. The rise suggests the disinflationary trend in core inflation has bottomed.
The still soft inflation scenario was supported by a rise in applications for unemployment benefits last week, which suggested the labor market recovery would remain gradual, restricting wage growth.
"It is in line with our view that the disinflation process bottomed in the fourth quarter. We do not see pricing power being passed along yet," said Michael Gapen, a senior U.S. economist at Barclays Capital in New York.
U.S. stock index futures added to losses after the data, while government bond prices held steady at higher levels. The dollar firmed versus the euro and the yen.
Overall CPI rose 0.4 percent after increasing by the same margin in December. Food and energy accounted for over two-thirds of the rise in overall CPI.
Economists had expected headline CPI to rise 0.3 percent last month.
The report came a day after the government reported core wholesale prices increased at their fastest pace in more than two years in January, raising concerns among some investors that inflation might be building up.
Despite the slightly above expectations rise in January, the consumer inflation report tended to support the Federal Reserve's views that inflation remains too low.
This is in stark contrast to other economies, where surging commodity prices have put central banks on the alert for inflation. The January consumer inflation report showed prices for new vehicles and used cars declining.
In the 12 months to January, core inflation rose 1.0 percent after rising 0.8 percent in December. That was the largest gain since March. Economists had expected a year-on-year rate of 0.9 percent.
In a second report, the Labor Department said initial claims for state unemployment benefits increased 25,000 to a seasonally adjusted 410,000, partially reversing the prior week's hefty decline.
Economists had forecast claims rising to 400,000. The claims data covers the survey period for part of the government's employment report for February.
But the correlation between claims and nonfarm payrolls has weakened somewhat. Claims have been hovering above the 400,000 mark, a sustained breach of which is regarded by economists as signaling strong jobs growth.
"When I put this with other data out there, it continues to reinforce the idea that things are slowly improving. Not as fast as a lot of people want, but we are improving," said TC Robillard, a senior research analyst at Signal Hill in Baltimore.
A Labor Department official said there was nothing unusual in the state-level data, adding that two states had been estimated.
The four-week moving average of unemployment claims -- a better measure of underlying trends - rose 1,750 to 417,750 last week.
The number of people still receiving benefits under regular state programs after an initial week of aid edged up 1,000 to 3.91 million in the week ended February 5.
Economists had expected so-called continuing claims to rise to 3.90 million from a previously reported 3.89 million.