August 19, 2022

U.S. Consumer Inflation Down in June

WASHINGTON — Overall consumer prices fell last month because of a steep drop in gasoline costs, the Labor Department reported Friday, but Americans paid more for autos and clothes.

The Labor Department says the Consumer Price Index fell 0.2 percent because of the decline in gas.

After excluding volatile food and gas costs, so-called core prices rose 0.3 percent. That was the second straight monthly gain and the largest back-to-back increases since the summer of 2008.

Many of the trends driving the increase in the core index are expected to fade later this year. New car prices rose 0.6 in June, after jumping 1.1 percent in May. Those increases reflect supply shortages stemming from Japan’s earthquake, which will ease in the fall.

Rising gas and food prices caused inflation concerns earlier this year. In the 12-month period from July 2010 to July 2011, consumer prices rose 3.6 percent. The yearly gain in the index was only 1.1 percent as recently as November.

Core prices have been much tamer. In the last year, they increased only 1.6 percent, below the Federal Reserve’s preferred target of 2 percent.

Some inflation can be healthy for the economy because it encourages people to spend and invest rather than sit on their cash. More spending drives corporate growth, which makes businesses more likely to hire people.

Low inflation allows the central bank to keep the short-term interest rate it controls at a record low near zero, where it has been since December 2008.

Oil prices have come down from their peak this spring, and gas costs have followed. The average national price per gallon was nearly $4 in early May. On Friday, a gallon of gas averaged $3.66 nationwide, according to AAA.

Clothing prices, meanwhile, rose 1.4 percent in June, the most since March 1990. That came after a 1.2 percent rise in May. The increase likely reflects higher cotton costs and more expensive clothing imports. Wages for apparel factory workers in countries like China have been rising in recent months.

Food prices increased 0.2 percent, the smallest gain since December.

The Federal Reserve chairman, Ben S. Bernanke, has said that recent price increases are likely to be temporary. High unemployment makes it unlikely that workers can press for more wages, which in turn makes it hard for companies to raise prices.

Fed policy makers expect core consumer inflation to average between 1.5 percent and 1.8 percent this year.

Meanwhile, the Federal Reserve reported Friday that American auto factories produced fewer vehicles in June than the previous month, and overall factory production across all industries was flat. It marked the third straight month of weak manufacturing output.

The Federal Reserve said factory production was unchanged last month following a tiny 0.1 percent rise in May. The May data were revised down from an initial 0.4 percent increase.

Auto production fell 2.0 percent in June, after declines of 0.3 percent in May and 6.6 percent in April. American automakers were having trouble getting component parts because of supply chain disruptions stemming from the March earthquakes and tsunami in Japan.

Industrial production, a broader measure that includes utilities and mining as well as manufacturing, rose 0.2 percent for the month after a 0.1 decline in May, the report said.

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