American consumers are at their lowest level of confidence

According to the government report, the CPI rose 0.4% in February, the largest one-month gain since July of last year and to make matters worse, the rate of inflation came on top of a 0.3% increase the prior month.

With lawmakers focusing on the governments economic bailout plan, the price of gasoline was to blame for the largest segment of consumer inflation whereas prior to the presidential election Democrats were grandstanding loudly about manipulation of fuel prices until after their Party won the White House. Now that Dems are in control of Congress its all about spending while taxpayers are put on the line to foot the bill.

Tuesday, energy prices rose as hints of an end to the US recession took hold on the commodity exchange trading floor in New York. If the recession is showing signs of ending, energy price speculation will only inflate the cost consumers pay at the pump and could give rise to even more inflation when the government releases its next Consumer Price Index for March.

Today's CPI report showed that February core consumer prices, which exclude energy and food, rose 0.2%, the same level of inflation when compared to January.

Energy prices rose 3.3% in February, the biggest month-over-month gain since last July when prices jumped 8.3%. But the good news is, when comparing the rate of inflation for energy in February to the year-ago period, consumer prices were down 18.5%. But a year-ago, consumers were still in a spending mood, unaware that a recession was at hand.

The US Department of Labor also indicated in its February CPI report that clothing costs increased 1.3%, the biggest monthly gain in 18 years. Auto prices also rose in February, gaining 0.8%, which was the highest rate of inflation since the Fall of 2004.

In other economic news, producer prices inched up 0.1% in February compared to a 0.8% gain the prior month. The PPI, which tracks the rate of inflation on prices received by farms, factories and refineries, indicates alongside today's consumer inflation rate that economic deflation concerns have decreased.

Deflation would mean an economic downward spiral that could push the US economy into a depression. But in looking back to February of 2008, the government now admits that the US economy was already headed towards a recession. That being the case, a year from now, the Obama administration may come clean in calling the current economy depressed.

The rate of unemployment will continue to remain high and while signs of recovery are around, factory workers at the world's biggest heavy equipment maker, Caterpillar (NYSE: CAT), were told that an additional 2,400 of them were being laid off, 1,700 of those in Illinois where Caterpillar is headquartered.

Thursday, the US Department of Labor will release its weekly initial jobless claims report that is expected to show continuing high levels of unemployment.

While the rate of inflation continues to rise for consumers, job security remains the number one issue in US households.