Consumer prices up 0.7% in June, inflation falls 1.4% in year

U.S. consumer prices jumped in June as higher energy costs — gasoline prices in particular — drove up the cost of living, although year-over-year inflation fell by the largest amount since Jan. 1950.

The Consumer Price Index, which measures inflation pressures at the consumer level, rose 0.7% in June following a 0.1% increase in May, the Labor Department reported Wednesday. At the same time, inflation fell 1.4% compared to a year ago when energy prices were at their height. The annual decline is the biggest in 59 years.

"It’s a bit of a bogus comparison, because we’re comparing gas prices at nearly their astronomical peak last year," Stuart Hoffman, economist at PNC, was quoted on CNNMoney.com and referred to the the-record high gasoline prices of over $4 per gallon in July 2008.

Excluding volatile food and energy prices, the core CPI rose 0.2% in June after a 0.1% increase in May.

"The C.P.I. is not much of a story this month," Mickey Levy, Bank of America’s chief economist, was quoted on NYTimes.com "The core is just moving sideways and then you have the upward pressure on energy and gas prices."

The upward pressure Levy refers to with energy and gasoline prices has subsided in July compared to June, further easing inflationary concerns over the short term.

"The risks are still to the downside [for prices], Rudy Narvas, an economist at 4Cast Inc. in New York, was quoted on Bloomberg.com. "Energy prices have come off. At the same time, we have an incredible amount of slack in the labor market — and, with wage growth not there, pressure on prices will be low," he said.

The core CPI is up 1.7% over the past year compared to a 1.8% gain in the 12 months ending in May. The figure is well within the Federal Reserve’s traditional comfort range of 1%-2%.

Consumer price details

Rising June prices include:

  • Energy prices jumped 7.4% following the 0.2% increase in May
  • Gasoline prices surged 17.3%, which accounted for over 80% of the CPI increase
  • Medical care rose 0.2% after a 0.3% increase in May and a 0.4% climb in April
  • Education and communication prices ticked 0.2% higher
  • New vehicles prices rose 0.7% after a 0.5% gain in May, and a 0.4 % increase in April
  • Used car and truck prices increased 0.9% following a 1.0% in May
  • Transportation prices rose by 4.2% after a 0.8% increase in May
  • Food and beverage prices rose 0.1% after a 0.2% decline in May and April
  • Fruits and vegetables rose 1.1% after declining 1.0 percent in May
  • Tobacco and smoking products rose 0.8% following a 0.3% in May
  • Natural gas prices rose 1.3% after falling in each of the ten previous months
  • Clothing prices gained 0.7% after falling 0.2% for three straight months
  • Rent increased 0.1%
  • Lodging away from home rose 0.3 percent

Declining June prices include:

  • Airfares fell 0.6% after two months of 1.5% declines
  • Dairy and related products dropped 0.9%, its seventh consecutive decrease
  • Meats, poultry, fish and eggs declined 0.2%
  • Electricity costs dropped by 1.9% following a 0.4% increase in May

Housing prices, which accounts for about a third of the CPI index, were flat following 0.1% declines from March through May.

In a separate report Tuesday, the Labor Department said producer price rose 1.8% in June. A companion-like report to the CPI, the PPI measures prices at the factory door and inflation pressures before they reach the consumer.

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