Uptick in US consumer prices
US consumer prices rose 0.3 per cent in July, pushed higher by more expensive gas, medical care and housing.
The consumer price index increased 1.8 per cent compared with a year earlier, up from 1.6 per cent in June, the US Labor Department said Tuesday. Excluding the volatile food and energy categories, core prices moved up 0.3 per cent in July and 2.2 per cent from a year ago.
The figures suggest that inflation is picking up slightly, though it remains modest. The economy is in its 11th year of growth, unemployment is low, and wages are growing modestly. These are trends that typically accelerate price gains. But many companies are reluctant to charge more in the face of online and global competition.
While last month’s price gains were modest, they were widespread. Clothing prices increased 0.4 per cent, used car and truck prices moved up 0.9 per cent, and prescription drug costs rose 0.4 per cent. Airline fares jumped 2.3 per cent.
Rents rose 0.3 per cent and are up 3.5 per cent in the past year. Hotel stays have got 4.6 per cent more expensive in the past year.
There are some signs higher wages may be having an effect. The cost of housing operations, such as cleaning, landscaping and moving, jumped 5.4 per cent in the past year.
The US Federal Reserve maintains a 2 per cent inflation target to avoid the destabilising effect of deflation, which can pull down prices and wages. It has mostly missed that target since it was established in 2012. Its preferred measure rose just 1.4 per cent percent in June compared with a year earlier. That measure isn’t as influenced by rental prices.
Fed Chairman Jerome Powell has cited tame inflation as a key reason the central bank cut short-term interest rates last month. Most economists expect further cuts this year to offset the negative impact of the Trump administration’s trade war with China.
Gas prices jumped 2.5 per cent in July, though they have already fallen back and will likely keep doing so since oil prices are declining. The average price for a gallon of gas was $2.64 Tuesday, down 15 cents from a month earlier.
One restraint on inflation last month was food prices, which were unchanged. Dairy prices fell in July while fruit and vegetable costs rose.