US July consumer prices rise 0.8%, fuel leads way

14 August 2008 17:53  [Source: ICIS news]

WASHINGTON (ICIS news)--US consumer prices rose 0.8% in July on a seasonally adjusted basis, the Labor Department said on Thursday, with fuel and other energy prices driving family cost increases with a full 4% boost.

 

The July increase marked a slight decline from the 1.1% increase seen in the department’s consumer price index (CPI) in June.

 

The department noted the rise in energy prices accounted for about half of the overall CPI gain in July. The energy element of the CPI has climbed sharply for the third straight month.

 

The economic impact of higher fuel and other prices on consumers is a concern to US chemical producers and other manufacturers because spending by households accounts for some 70% of the nation’s commercial activity.

 

Ordinarily, successive one-month increases in consumer prices of near or above 1% would raise concerns that the US Federal Reserve Board - the US central bank - might be moved to raise interest rates to head off an inflationary surge.

 

However, analysts noted that recent bumps in the CPI have been driven chiefly by sharp increases in gasoline and other fuel costs since the beginning of the year.

 

But both the price of oil and US retail gasoline costs have moderated significantly since highs seen in May, and analysts suggest the Fed may see in declining fuel costs reason enough to hold interest rates steady. 

 

The Fed's next interest rate policy meeting will be on 16 September.

 

Still, the price index for foods rose 0.9% in July after rising 0.8% in June, and the department noted that indexes for apparel and recreation also increased more sharply in July than in June, while costs for shelter and medical care also increased.

 

But the index for all consumer items other than food and energy - the so-called core index - rose by a more moderate 0.3% in July.

 

Overall, the department said that inflationary pressures are coming to bear on US consumers and the broader economy.

 

During the first seven months of this year, the department said, the CPI rose at a seasonally adjusted annual rate of 6.2%, compared with a 4.1% increase for the 12 months ending December 2007.

 

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By: Joe Kamalick
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