Con­sumer prices rise

Los Angeles Times - - BUSINESS - By Jim Puz­zanghera jim.puz­zanghera @la­times.com Twit­ter: @JimPuz­zanghera

The 0.1% uptick is the first in­crease in three months, but inf la­tion re­mains soft.

The new data showed in­fla­tion re­mains soft, a trend that has con­cerned Fed­eral Re­serve of­fi­cials.

WASHINGTON — Con­sumer prices in­creased in July for the first time in three months as Amer­i­cans paid more for food, but the mod­est hike kept an­nual in­fla­tion still run­ning low, the La­bor De­part­ment said Fri­day.

The 0.1% price in­crease last month was less than the 0.2% rise that an­a­lysts had fore­cast.

The new data showed in­fla­tion re­mains soft, a trend that has con­cerned Fed­eral Re­serve of­fi­cials be­cause it in­di­cates that the econ­omy still is not op­er­at­ing at max­i­mum ef­fi­ciency.

For the 12 months that ended July 31, con­sumer prices in­creased 1.7%. That was up from the 1.6% rate for the 12 months that ended June 30.

The 12-month rate ex­clud­ing volatile food and en­ergy costs also was 1.7% through July 31, the same an­nual pace recorded the pre­vi­ous two months.

Fed pol­i­cy­mak­ers want prices to in­crease 2% a year, a level that in­di­cates ris­ing wages but that does not cause the econ­omy to over­heat.

A tight­en­ing la­bor mar­ket should be help­ing to in­crease inf la­tion, but that has yet to hap­pen con­sis­tently in the re­cov­ery from the Great Re­ces­sion.

The an­nual in­fla­tion rate as mea­sured by con­sumer prices has been mov­ing down since win­ter af­ter climb­ing above 2%. With­out a sig­nif­i­cant re­ver­sal, the data could lead Fed of­fi­cials to hold off on fu­ture in­creases in a key short-term in­ter­est rate.

Fed pol­i­cy­mak­ers pre­fer a dif­fer­ent mea­sure of in­fla­tion that is based on per­sonal con­sump­tion ex­pen­di­tures and tends to run lower than the con­sumer price in­dex.

The per­sonal con­sump­tion ex­pen­di­ture price in­dex was flat in June, the lat­est data avail­able.

For the 12 months that ended June 30, that in­dex in­creased just 1.4% af­ter the an­nual rate had been near 2% ear­lier in the year. Ex­clud­ing food and en­ergy prices, the in­dex was up 1.5%.

Fed Chair­woman Janet L. Yellen has said the re­cent slow­down in in­fla­tion was mostly due to tem­po­rary fac­tors, such as re­duc­tions in the costs of cell­phone plans.

In Fri­day’s con­sumer price re­port, the La­bor De­part­ment said food costs in­creased 0.2% last month af­ter be­ing flat in July.

The in­crease more than off­set a 0.1% de­cline in en­ergy prices.

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