U.S. consumer prices remained unchanged in July but annual inflation registered its largest decline since 1950, the Labor Department reported Friday.
The latest data helped ease concerns of rising inflation due to government spending and the Federal Reserves monetary policy of injecting cash into the US economy.
"It [inflation] could be a very large long-run problem," Mickey Levy, Bank of America, chief economist, was quoted on NYTimes.com. "But in the near-term, it’s not a problem at all."
The Consumer Price Index, which measures inflation pressures at the consumer level, remained unchanged in July due largely to falling gasoline and food prices. Consumer prices were up 0.7% in June.
"The drop in CPI is mainly due to lower gasoline prices and lower grocery store prices," Mark Vitner, an economist at Wells Fargo Economics Group, was quoted on CNNMMoney.com. "Lower food prices are good news for consumers and should help free up some discretionary dollars for other purchases."
The core CPI, which excludes volatile energy and food costs, climbed 0.1% in July after a 0.2% increase in June.
Annual inflation plunged 2.1%, the sharpest decline since January 1950, and compares to the 1.4% decline in the 12 months ending in June.
"I don’t really see inflation as being much of a threat over the next several months because there’s just too much slack in the economy," Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, was quoted on Bloomberg.
Lower energy prices were again mostly responsible for inflation’s decline. Energy costs in July were down 28.1% from a year ago when oil was near $150 a barrel and prices at the pump above $4 a gallon.
The core CPI is up 1.5% over the past year compared to a 1.7% gain in the 12 months ending in June. The figure is well within the Federal Reserve’s traditional comfort 1%-2% range.
Consumer price details
Rising July prices include:
- Medical care rose 0.2% as they did in June and after a 0.3% increase in May
- Education and communication prices climbed 0.3% following a 0.2% rise in June
- New vehicles prices rose 0.5% after a 0.7% increase in June, a 0.5% gain in May, and a 0.4 % increase in April
- Transportation prices rose 0.2% in July after a 4.2% rise in June
- Tobacco prices rose 2.2% as excise tax increases in several states went into effect in July
- Natural gas prices rose 0.9% after a 1.3% gain in June
- Clothing prices gained 0.6% following a 0.7% increase in June after falling 0.2% for three prior months
- Airfares rose 2.1% in July after declining in each of the previous ten months
Declining July prices include:
- Energy prices fell 0.4% following a 7.4% increase in June
- Gasoline prices fell 0.8% after a 17.3% increase in June
- Electricity costs dropped by 0.6% following a 1.6% decline in June
- Housing prices, which accounts for about a third of the CPI index, fell by 0.2%
- Food and beverage prices fell 0.2% after a 0.1% in June and a 0.2% decline in May and April
- Prices for fruits and vegetables, for nonalcoholic beverages, and for other food at home all declined 0.3% in July
- Lodging away from home fell 2.1% after rising 0.3% in June
- Dairy and related products dropped 0.6%, its eight consecutive decrease
- Meats, poultry, fish and eggs declined 1.3% after a fall of 0.2% in June
Used car and truck prices were unchanged in July after rising 0.9% in June and 1.0% in May. Rent costs were also unchanged after an increase of 0.1% in June.