The Bureau of Labor Statistics reported the consumer price index (CPI) rose 0.5 percent in July, reversing last month’s decline. This increase was led by a strong rebound in energy costs, with continued growth in the price of food items. After two months of falling energy prices, consumers paid 2.8 percent more for energy in July; over the course of the last year, energy prices have risen 19 percent. Food costs, meanwhile, were up 0.4 percent in July, which was higher than the 0.2 percent increase in June. For the year, food and beverage costs have jumped 4.2 percent.
Core inflation, which excludes food and energy costs, was up 0.2 percent. It has moderated somewhat from the 0.3 percent increases of May and June. This translates into a 1.8 percent increase in core inflation over the past year, a sign that consumers continue to get squeezed in their pocketbooks; this figure has been trending up in recent months. Core inflation in January was pacing at below 1 percent on a year-over-year basis.
For the month, the largest price increases were seen in gasoline, apparel, dairy and related products and fruits and vegetables. There were modest price decreases for household energy, meats, sugars, alcoholic beverages, and public transportation.
Overall, these numbers reflect the rebound in petroleum prices in July, which lifted gasoline prices. Since then, of course, petroleum prices have been pushed back down over worries about global economic growth and weakened demand. In terms of overall core inflation, it is not yet a major worry, particularly as 1.8 percent annualized growth is still a modest figure. Nonetheless, consumers are clearly feeling pinched by higher costs – particularly on food and energy – and we have seen this impacting their spending decisions in recent months.
Chad Moutray is chief economist, National Association of Manufacturers.