US Inflation Rate at 1.1%, August 2010 Consumer Prices Advance 0.3%

The cost of living in the U.S. rose in August for a second month in a row as energy and food prices continued to climb, the government reported Friday. The 12-month inflation rate rose as well, but the annual core number remained below preferred Fed levels which keeps conversations of deflation circling.

The Consumer Price Index rose 0.3 percent in August, matching the July increase after a dip of 0.1 percent in June, data from the Labor Department showed.

Leading August increases was a 2.3 percent rise in energy prices, with gasoline costs at the top.

"The energy index rose in August and, as in July, was the primary factor in the seasonally adjusted all items increase," noted the Labor Department CPI August report. "All major energy components posted increases, with the gasoline index being the main factor."

Gasoline prices were up 3.9 percent in August following a 4.6 percent pick up in July. Gasoline declined 4.5 percent in June.

Food prices rose 0.2 percent last month — the biggest increase since April. They had been flat in May and June until falling 0.1 percent in July.

Pulling out volatile food and energy prices, the so called core inflation rate was flat after rising 0.1 percent in July.

"These numbers won’t be a surprise to Fed policy makers," Yelena Shulyatyeva, a U.S. economist at BNP Paribas in New York, who accurately forecast the consumer price figures, said and quoted on Bloomberg. "They need to worry about unemployment and boosting growth and not worry about inflation."

Inflation over the past 12 months rose 1.1 percent after a year-over-year reading of 1.2 percent in July. Core inflation gained 0.9 percent on an annual basis — the same level since April, and the smallest 12-month increase since January 1966.

The annual core rate remains a notch below the Federal Reserve’s target range of 1-2 percent, which increases deflation worries.

"A dip below 1% shows that the economy is just one modest contraction away from dipping into a Japanese like deflation," Steven Ricchiuto, chief economist at Mizuho Securities USA, said and was quoted on MarketWatch.

Deflation is a persistent decrease in general prices, or the opposite of inflation. Falling prices may seem like good news for consumers, but only to a certain point. If prices mark sustained deflationary levels that strike below the cost to produce goods and services, economic turmoil can ensue with production cuts, payroll reductions and deepened unemployment.

CPI details as reported by the Labor Department follow:

August 2010 Consumer Prices

Feb Mar Apr May Jun Jul Aug 12
Month
All items .0 0.1 -0.1 -0.2 -0.1 0.3 0.3 1.1
  Food 0.1 0.2 0.2 .0 .0 -0.1 0.2 1.0
    Food at home 0.1 0.5 0.2 .0 -0.1 -0.1 .0 0.8
    Food away from home 0.1 .0 0.1 0.1 0.1 .0 0.3 1.2
  Energy -0.5 .0 -1.4 -2.9 -2.9 2.6 2.3 3.8
    Energy commodities -1.3 -1 -2.1 -4.8 -4.1 4 3.8 5.1
      Gasoline (all types) -1.4 -0.8 -2.4 -5.2 -4.5 4.6 3.9 4.4
      Fuel oil -2.4 0.7 2.3 -1.4 -3.2 -1.6 0.9 10.6
    Energy services 0.5 1.4 -0.5 -0.5 -1.6 0.8 0.4 2.1
      Electricity -0.5 2.1 0.7 -0.4 -2.2 0.5 0.2 1.6
      Utility (piped) gas service 3.9 -0.7 -4.4 -1 0.6 1.7 1.1 3.8
  All items less food, energy 0.1 .0 .0 0.1 0.2 0.1 .0 0.9
    Comm. less food, energy -0.1 -0.1 -0.3 0.1 0.2 0.2 0.1 1.3
      New vehicles 0.1 0.1 .0 0.1 0.1 0.1 0.3 2.3
      Used cars and trucks 0.7 0.5 0.2 0.6 0.9 0.8 0.7 15.5
      Apparel -0.7 -0.4 -0.7 0.2 0.8 0.6 -0.1 -0.4
      Medical care 0.8 0.4 0.2 0.1 .0 -0.2 0.2 3.0
    Services less energy 0.1 0.1 0.2 0.1 0.1 0.1 .0 0.7
      Shelter .0 -0.1 .0 0.1 0.1 0.1 .0 -0.7
      Transportation 0.4 0.4 0.4 0.4 .0 .0 0.1 3.5
      Medical care 0.4 0.3 0.3 .0 0.4 .0 0.2 3.2

 

The Consumer Price Index for September 2010 is scheduled to be released on Friday, October 15, 2010, at 8:30 a.m. (EDT). The CPI data is used as the core engine for the US Inflation Calculator.

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