US consumer prices up on increased energy prices

US consumer prices up on increased energy prices

08-17-2010 11:43

The US government revealed that the consumer price index (CPI) surged last month due to increased energy prices. Month-over-month, prices rose for the first time in four months. The key index of consumer prices increased 1.2% over the past year, boosted by a 5.2% rise in energy prices as a result of increased gasoline prices. In June, overall prices rose 1.1% in comparison to last year.

Consumer price index

The core consumer price index is an important gauge for market watchers as it excludes fluctuating food and energy prices. The core CPI increased 0.9% over the last twelve months. Paul Ashworth, a senior US economist for Capital Economics, commented: “Core inflation is still rather weak. However, the near-term risk of it falling to zero or even below has shrunk considerably.” The Fed maintains its forecast for inflation to stay muted for some time.

Energy prices

Overall prices rose 0.3% last month, which is the first rise since March. Economists had forecasted a 0.2% increase. Prices dropped 0.1% in the previous month. Energy prices increased for the first time since January, due to gasoline and commodity prices rising more than 4% in July. Prices of vegetables and fruits dropped, resulting in lower food prices. Ashworth noted: “Gasoline prices rose 4.6% on a monthly basis, compensating a comparable decrease in June.”

Food prices

Food prices changed modestly in the last months. Ashworth forecasts that food prices will rise strongly in the next months as a result of the recent increase of agricultural commodity prices, like wheat.

Core CPI

The core CPI rose 0.1% in July, while economists expected a 0.2% decrease. Prices for housing, clothing, cars and tobacco increased furthermore. Costs for medical care, airline tickets and home furniture dropped.