Inflation Is Fueled by Gasoline Prices

Rising gasoline costs put a dent in motorists’ wallets in August and contributed to the biggest increase in consumer prices in five months, the Labor Department reported Tuesday.

The government’s most closely watched inflation barometer, the consumer price index, rose 0.3%, matching the increase of last March. Consumer prices had gone up 0.2% in both June and July.

Energy costs jumped 2.7% in August, up from a 0.4% rise the previous month. Most of the increase was due to skyrocketing prices for gasoline, which soared 6.2%.

“Energy prices were the villain again,” said Ken Mayland, president of ClearView Economics.

Excluding energy and food prices, which tend to swing widely from month to month, core consumer prices nudged up just 0.1% in August, half the 0.2% increase of the previous month. The showing on the core inflation rate suggested that most other prices were moderate.

The latest CPI reading “confirms inflation is relatively modest, at least for now,” said Stephen Cecchetti, economics professor at Brandeis University. From an economic perspective, he added, “There isn’t much here to lose sleep over.”

Even with recent increases in the CPI, the Federal Reserve Board on Tuesday held interest rates at 45-year lows amid signs that the economy is getting on firmer footing after months of wobbling.

For the 12 months ended Aug. 31, consumer prices rose 2.2%, compared with a 2.4% increase for all of last year. Core prices, excluding energy and food costs, meanwhile, went up just 1.3% over the last 12 months, the smallest year-to-year increase since 1966, and down from a 1.9% advance for all of 2002.

The weakness in core prices is a byproduct of a lackluster economic climate early this year that made it difficult for some companies to raise prices. That’s a benefit for consumers, but can squeeze producers’ profits margins.

Computer prices fell 2.9% in August. Airline fares dropped 1.6% and costs for lodging prices dipped 0.3%.

But those and other price decreases were swamped last month by rising energy prices, chiefly for gasoline. Gasoline prices skyrocketed after the mid-August blackout, but more recently have shown signs of stabilizing.

Food prices, meanwhile, increased 0.3% in August, up from a tiny 0.1% rise. Rising prices for dairy products and beef and veal outweighed falling prices for fruit and pork.

Medical-care costs rose 0.2% in August and were 3.9% higher than a year earlier.