US fuel drives up consumer prices

However, Department of Labor figures showed that when food and energy costs were excluded prices rose by just 0.2%.

Over the past 12 months consumer prices rose 4.0%, the largest yearly increase since October 2005 and up on December's figure of 3.4%.

Analysts said the higher-than-expected rise in prices during January would lead to pressure for more rate rises.

Pressure on rates

"Clearly the rise of 0.7% is higher than most economists expected, so it's a disappointment," said Hugh Johnson, chief investment officer at Johnson Illington Advisors in New York.

"The biggest reason for the increase was a 5% rise in energy prices. It's very clear that higher energy prices are now being passed along to consumers, and it's not difficult to do that when the economy is as strong as it is.

"This will put additional pressure on the Federal Reserve to continue to raise short-term interest rates."

The rise in overall consumer prices in January was powered by a 5.0% hike in energy costs, a 0.5% addition to food costs and a 1.8% increase in transportation bills.

Petrol prices were up 6.4%, electricity prices 5.5% higher and natural gas prices up 1.7%. However, there was a 1.9% fall in the cost of fuel oil.

Real earnings down

The increase in consumer prices since January 2005 was above the 3.6% increase in average weekly earnings during the same period.

Another Labor Department report said real average weekly earnings fell 0.2% in January, the first drop since September, after a 0.5% increase in December.

RELATED INTERNET LINKS:
US Labor Department
The BBC is not responsible for the content of external internet sites