The Bureau of Labor Statistics said that consumer prices rose 0.2 percent in July, moderating slightly from June’s 0.5 percent rise. Both food and energy costs were higher, but the growth in energy prices slowed from the previous month. In June, the cost of energy products increased 3.4 percent, with gasoline alone up 6.3 percent. In July, those growth rates eased to 0.2 percent for energy goods and 1.0 percent for gasoline. This is consistent with the recent rise in West Texas intermediate crude oil costs, which have risen from an average of $93.80 a barrel in June to $104.61 in July.

Food prices rose 0.2 percent and 0.1 percent in June and July, respectively. The cost of fruits and vegetables were up sharply for the month, with pork prices also higher. These gains were counteracted by reductions in the price of cereal products, dairy products, and nonalcoholic beverages, among others. On a year-over-year basis, food prices have risen 1.4 percent, with the largest gains occurring in food consumption away from home (up 2.1 percent).

Outside of food and energy, the largest year-over-year increases in prices were for transportation services (up 3.0 percent), medical care services (up 2.6 percent), shelter (up 2.3 percent), tobacco and smoking products (up 1.7 percent), apparel (up 1.6 percent), and new motor vehicles (up 1.2 percent).

Overall, consumer prices have risen 2.0 percent over the course of the past 12 months. This suggests a pickup in inflationary pressures, with the annual pace up from 1.1 percent in April and 1.8 percent in June. Excluding food and energy, core inflation is currently 1.7 percent, edging slightly higher from the 1.6 percent rate observed in June.

These data suggest that inflation remains modest, with core inflation below the Federal Reserve’s stated target of 2 percent. The producer price index report released yesterday said mostly the same thing. This allows the Federal Reserve to pursue “highly accommodative” policies, even as it seeks to “taper” (or slow) its asset purchases later this year.

Chad Moutray is the chief economist, National Association of Manufacturers.

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