Consumer prices drop for third straight month

The prices that U.S. consumers pay for goods and services fell slightly in June, mainly because of lower gasoline costs, the government reported Friday.

The consumer-price index dropped a seasonally adjusted 0.1%, the third straight monthly decline, according to Labor Department data.

The closely followed core prices, seen as a better gauge of inflationary trends, rose 0.2% for the biggest gain since October 2009. Yet core inflation, which excludes particularly volatile food and energy prices, is still very low.

Economists surveyed by MarketWatch had predicted a flat reading in overall consumer prices and a 0.1% increase in the core rate.

Over the last 12 months, consumer prices have increased 1.1%. Core prices have risen a scant 0.9% during that span.

Because inflation remains low and the economy is still frail, the Federal Reserve has tried to stimulate growth by keeping short-term interest rates near zero. The potential for rising prices is seen as minimal.

“Policy makers continued to anticipate that both overall and core inflation would remain subdued through 2012,” according to a Fed report released this week.

The central bank’s main concern is slack U.S. growth, but the Fed has few options left to address the problem. Most companies are not hiring and continue to hoard cash, offsetting the effects of low interest rates. Consumers have also cut back on spending, reducing demand for goods and services.

The biggest decrease in consumer prices in June occurred in energy, mostly gasoline for autos as well as electricity. Energy prices fell 2.9% for the second month in a row.

The gas index, down 4.5%, retreated for the fifth straight month after nine consecutive increases. And electricity prices, which were 2.2% lower, saw the sharpest one-month drop since October 1986.

In the last year, however, energy prices are still up 3%.

Food prices were unchanged in June. Prices fell for fruits and vegetables, but they rose for meats, poultry, fish and eggs.

Aside from energy and food, prices increased in most other areas of the economy. The government showed higher prices in shelter, clothes, medical care and recreation, among other things.