Inflation increases more than expected in U.S. in July

U.S. consumer prices rose in July by more than expected on a jump in auto and apparel costs, though inflation remained broadly muted as the pandemic suppressed demand.

The consumer price index rose 0.6 per cent from the prior month, following a 0.6 per cent gain in June, Labor Department figures showed Wednesday. The median forecast in a Bloomberg survey of economists called for a 0.3 per cent increase. Compared with a year earlier, the gauge increased one per cent, after June’s 0.6 per cent rise.

Excluding volatile food and fuel costs, the so-called core CPI — viewed by policy-makers as a more reliable gauge of price trends — rose 0.6 per cent from the prior month, the biggest jump in almost three decades, after a 0.2 per cent increase in June. On an annual basis, core inflation measured 1.6 per cent, a four-month high, following1.2 per cent in June.

The gain in consumer prices reflects the rebound in demand for goods and services from the depths of the pandemic-induced lockdowns earlier this year. At the same time, Federal Reserve policy-makers have seen little threat of inflation and expect to hold interest rates near zero for the foreseeable future, though investors in Treasuries have signalled they expect price gains to pick up amid extended monetary stimulus.

Prices for clothing rose 1.1 per cent after a 1.7 per cent jump in June, while used cars rose 2.3 per cent, the most since early 2010.

New vehicles also increased 0.8 per cent, the biggest gain in nine years.

Car insurance costs posted a record monthly increase of 9.3 per cent following company rebates in prior months that accounted for less driving.

The cost of groceries fell 1.1 per cent from the prior month, the first decline in almost a year.