U.S. Consumer Prices Rise As Energy, Food Costs Rebound

(RTTNews) - Consumer prices rose more than expected in July, though a key indicator of inflationary pressure rose less swiftly, according to figures released Thursday by the Labor Department.

The consumer price index increased 0.5 percent on a seasonally adjusted basis in July, more than erasing the 0.2 percent decline posted in June. It was the biggest increase in consumer prices since March.

Gasoline prices, which had shown some declines in June, rebounded sharply rising 4.7 percent in July, accounting for about half of the overall increase. The broader energy index, which had declined in May and June, increased by 2.8 percent in July.



Food prices also increased, rising 0.4 percent in July, more than the 0.2 percent increase posted in June. With the exception of cereals and bakery products, all of the major grocery store food groups increased, with dairy rising 1.2 percent, fruits and vegetables rising 1.2 percent and beverages rising 0.9 percent. The index for meats, poultry, fish and eggs rose 0.5 percent. Excluding the volatile food and energy sectors, "core" consumer prices, considered a more important measure of inflationary pressures, rose by a more modest 0.2 percent in July. That increase was slightly less than the 0.3 percent increase posted in June and was in line with the expectations of most economists.

Driving the core costs increase were increases in costs for shelter, medical care, apparel and used vehicles. Consumer prices for new vehicles, which have risen notably in each of the past five months, were unchanged in July, as were the indexes for personal care and household furnishings. Chris Low, analyst at FTN Financial, cautioned that the price increased are likely to prove transitory.

"Dollar weakness during the debt-limit fight contributed to a rise in commodity prices which quickly abated after the debt-limit agreement was reached, so this headline price pressure should be gone by the next report," Low said. The rising consumer prices erased a 0.4 percent increase in average hourly earnings, resulting in a real average hourly earnings decline of 0.1 percent. The average workweek was unchanged, leaving real average weekly earnings also down 0.1 percent.

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