Consumer prices in US stay flat as inflation in check
Source: Agencies |
August 16, 2012, Thursday
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Print Edition
Print Edition
UNITED States consumer prices were unchanged in July from June, as a small drop in energy costs offset slightly higher food prices. The Consumer Price Index hasn't increased since March, evidence that the weak economy is keeping inflation in check.
Core consumer prices, which exclude volatile food and energy costs, ticked up 0.1 percent last month, the US Labor Department said yesterday. More expensive medical costs, clothing and rents pushed up core prices. Prices increased 1.4 percent in the 12 months ending in July. That's down from 1.7 percent in June and is the smallest yearly increase in 20 months. Core prices have increased 2.1 percent in the past year, down from a 2.2 percent pace in June.
A severe drought in the Midwest threatens to push up supermarket prices later this year. But in July, the cost of food only rose 0.1 percent. Cereals, bread, meat and chicken all were more expensive in July. But prices for cheese and other dairy products and fruits and vegetables fell.
Mild price rises leave consumers with more money to spend, which can boost economic growth. Lower inflation gives the Federal Reserve more leeway to launch new programs intended to hike growth.
"Inflation is on a clear downward trajectory," said James Marple, senior economist for TD Economics. "With an unemployment rate at 8.3 percent, weak economic growth, both domestically and globally, and a rising US dollar, inflation is likely to drift lower over the coming months."
The Fed signaled at a meeting in late July that it is ready to act if growth and hiring stay weak. That led many economists to predict the Fed would announce a third round of bond purchases designed to push long-term interest rates down and generate more borrowing and spending in the economy.
Recent signs point to some economic improvement in July. Employers added the most jobs in five months, while consumers increased their retail spending after three months of declines. A slightly better outlook for the economy could prompt the Fed to hold off on taking action when its policy committee next meets in September.
Falling inflation could even encourage Fed Chairman Ben Bernanke to launch another round of bond-buying. A small amount of inflation can be good for the economy, because it encourages consumers and businesses to spend before prices rise further.
Core consumer prices, which exclude volatile food and energy costs, ticked up 0.1 percent last month, the US Labor Department said yesterday. More expensive medical costs, clothing and rents pushed up core prices. Prices increased 1.4 percent in the 12 months ending in July. That's down from 1.7 percent in June and is the smallest yearly increase in 20 months. Core prices have increased 2.1 percent in the past year, down from a 2.2 percent pace in June.
A severe drought in the Midwest threatens to push up supermarket prices later this year. But in July, the cost of food only rose 0.1 percent. Cereals, bread, meat and chicken all were more expensive in July. But prices for cheese and other dairy products and fruits and vegetables fell.
Mild price rises leave consumers with more money to spend, which can boost economic growth. Lower inflation gives the Federal Reserve more leeway to launch new programs intended to hike growth.
"Inflation is on a clear downward trajectory," said James Marple, senior economist for TD Economics. "With an unemployment rate at 8.3 percent, weak economic growth, both domestically and globally, and a rising US dollar, inflation is likely to drift lower over the coming months."
The Fed signaled at a meeting in late July that it is ready to act if growth and hiring stay weak. That led many economists to predict the Fed would announce a third round of bond purchases designed to push long-term interest rates down and generate more borrowing and spending in the economy.
Recent signs point to some economic improvement in July. Employers added the most jobs in five months, while consumers increased their retail spending after three months of declines. A slightly better outlook for the economy could prompt the Fed to hold off on taking action when its policy committee next meets in September.
Falling inflation could even encourage Fed Chairman Ben Bernanke to launch another round of bond-buying. A small amount of inflation can be good for the economy, because it encourages consumers and businesses to spend before prices rise further.
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