US CPI up most in a decade
washington — A gauge of US consumer prices jumped by the most in a decade in July, eating into wage gains that have barely budged in the past four months and strengthening the case for the Federal Reserve to keep raising increase rates gradually.
The core measure of the Consumer Price Index, which excludes food and fuel, rose 2.4 per cent from a year earlier, the biggest advance since September 2008, a Labor Department report showed on Friday. From the prior month, both the main CPI index and core rate rose 0.2 per cent — matching expectations.
While shelter costs gave a big boost to the results, steady consumer demand is underpinning inflation just as a trade war threatens to lift costs on a range of goods. Sustained progress toward the Fed’s goal keeps the central bank on track for one or two more rate hikes this year even as price pressures are a blow to already weak increases in paychecks.
A separate Labor Department report on Friday showed inflationadjusted wages were unchanged in July from the previous month and dropped 0.2 per cent from a year earlier. The lack of much real wage growth has become a contentious issue for Republicans and Democrats heading into midterm congressional elections in November.
The overall CPI gauge rose 2.9 per cent in the 12 months through July, matching the survey median, the report showed. Core CPI was projected to advance 2.3 per cent on an annual basis.
A 0.3 per cent jump in shelter costs accounted for about 60 per cent of the increase in the overall CPI last month, the Labor Department said.
Some items that posted big declines in June reversed course in July. Among them were hotel and motel rates, which rose 0.4 per cent after a record decline of 4.1 per cent in June. Airfares jumped 2.7 per cent, the most since July 2013, following a 0.9 per cent drop in June.
Apparel decreased again, dropping 0.3 per cent after falling 0.9 per cent the prior month. The core CPI reading brought the three-month annualised gain to 2.3 per cent, after rising 1.7 per cent in June.
The Fed’s preferred gauge of inflation — a consumption-based figure that tends to run slightly below the Labor Department’s CPI — has been at or above the central bank’s 2 per cent goal since March, though the related core index was still shy of the target.
Fed officials see core inflation as a more reliable gauge of underlying price pressures. —