Inflation Edges Up; Housing Still Strong

U.S. consumer inflation rose modestly in June, while housing remained a bright spot in an otherwise lackluster economy, the government said Wednesday.

Consumer prices rose modestly in June as falling energy prices helped offset price gains in food, housing and medical care, the government said. The Labor Department said its consumer price index, the nation’s broadest gauge of inflation, rose 0.2% in June after a 0.4% gain during the previous month.

Excluding volatile food and energy prices, the so-called core index rose 0.3% after a 0.1% advance in May.

In the Los Angeles area, consumer prices climbed 0.8% in June. The main culprit was higher electricity prices, the result of a $5.7-billion rate increase approved by the California Public Utilities Commission that took effect last month.

Over the last 12 months, consumer prices have risen 4.6% in the region, which encompasses Los Angeles, Orange, Ventura, Riverside and San Bernardino counties. The region’s core rate of inflation is up 2.9% since June 2000.

The housing industry maintained its role as the economy’s star sector with an increase in the rate of housing starts.

At the same time, economists said the rise in inflation is due in part to rising home prices.

The Department of Commerce reported ground-breaking for new homes reached a seasonally adjusted annual rate of 1.658 million units in June, a 3% increase from the May rate of 1.610 million. Starts were 6.3% above a year ago and the highest rate since 1.666 million units in January.

Building permits fell 3.3% in June to a seasonally adjusted annual rate of 1.568 million. Permits were a scant 0.1% higher than a year ago.

Economists discounted a drop in building permits, sometimes seen as an indicator of builder confidence in the economy.

The overall decline was caused by a large slide in permits for apartments, but the rate for sign-offs on single-family units increased, economists noted.

Rates for 30-year, fixed-rate mortgages, the most common type of home-buying loan, rose to 7.21% in the week ended July 13, according to mortgage finance company Freddie Mac.

That was the highest level in six weeks, although 30-year rates averaged 8.09% a year ago.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Consumer Price Index

Monthly percentage change, seasonally adjusted:

Source: Bureau of Labor Statistics