The cost of living in the U.S. climbed in July for the first time in four months, pointing to a stabilization that may ease concern a slowdown in growth will spur deflation.
The consumer-price index increased 0.3%, the most in a year and exceeding the 0.2% gain projected by the median forecast of economists surveyed by Bloomberg News, figures from the Labor Department showed today in Washington. A gauge excluding volatile food and fuel costs, the so-called core rate, increased 0.1%, as projected.
The report showed rents, the biggest component in CPI, increased for a second month, and the cost of clothing, used cars and tobacco climbed, diminishing the risk of a protracted drop in prices that would hurt the economy. Economists say the lack of inflation gives Federal Reserve policy makers scope to leave the benchmark interest rate near zero into 2011 to help invigorate the economy.
A report from the Commerce Department showed sales at U.S. retailers rose less than forecast in July, indicating the lack of jobs is prompting Americans to rein in spending. Purchases increased 0.4%, led by autos and gasoline. Excluding auto dealers and service stations, demand dropped 0.1%.
The forecast gain in consumer prices was based on the median estimate of 77 economists in a Bloomberg survey. Projections ranged from no change to a gain of 0.4%.
In the 12 months ended in July, prices rose 1.2% following a 1.1% year-over-year gain the prior month. Economists had forecast a 1.2% rise in the 12 months to July, according to the survey median.
The core rate rose 0.9 percent from July 2009, matching the smallest year-over-year gain since 1966.
Compared with a month earlier, energy costs increased 2.6%, and food costs fell 0.1%
Fed policy makers this week left the overnight interbank lending rate target in a range of zero to 0.25%, where it’s been since December 2008. High unemployment, low inflation and stable price expectations "are likely to warrant exceptionally low levels of the federal funds rate for an extended period," the U.S. central bank said, repeating language from every policy meeting since March 2009.
The CPI is the broadest of three monthly price gauges from the Labor Department, because it includes goods and services. Almost 60% of the CPI covers prices consumers pay for services ranging from medical visits to airline fares and movie tickets.
The cost of medical care decreased 0.1% in June, the biggest drop since 1975.
A Labor Department report yesterday showed prices of goods imported into the U.S. rose less than forecast in July. The 0.2% increase marked the first gain in three months and followed a 1.3 percent drop in June.
The producer-price index for July is scheduled for release on Aug. 17. Economists surveyed by Bloomberg forecast a 0.2% gain, which would be the first increase since March.
