WASHINGTON — The U.S. January consumer price index was up 0.4%, and core CPI rose 0.3% — unrounded up 0.3106% — both higher than expected and bad for bonds, although most of the admittedly widespread price gains appear to be related to start-of-year book price postings that may not hold in a weak economy.

In the core, apparel was up 0.4% — unadjusted down 2.1% — airfares rose 0.8%, drugs grew 0.7%, tobacco increased 1.1%, tuition climbed 0.6%, and hotels rose 1.1%, most of which seem to be in non-necessities. This is another reason that higher price lists might not hold. The last time the core CPI was up 0.3% was in June 2006.

Owners’ equivalent rent at a 0.3% increase is worrisome, as it marks a third month of an elevated 0.3% rise. Rising levels of unsold homes are expected to boost the rental stock and thus hold down rental costs ahead.

Over-the-year CPI was up 4.3%, its highest since September 2005, and over-the-year core was 2.5% higher. Core was also up 2.5% in February 2007, proving the point of possibly bad seasonal adjustments in winter.

Food printed up 0.7% as poultry, fruit, and vegetable prices soared. Energy was plus-0.7%, as jumps in fuel oil and gasoline offset dips in electricity and natural gas costs.

Rising crude oil prices should keep pressure on the CPI ahead. However, a Bureau of Labor Statistics economist said that seasonal adjustment may flat-line gasoline prices in the February CPI.

— Market News International

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