Consumer prices rise for first time in three months, but inflation rate remains low

Customers shop at a Whole Foods Market in Upper Saint Clair, Pa., on May 3.
(Gene J. Puskar / Associated Press)

Consumer prices increased in July for the first time in three months as Americans paid more for food, but the modest hike kept annual inflation still running low, the Labor Department said Friday.

The 0.1% price increase last month was less than the 0.2% rise that analysts had forecast.

The new data showed inflation remains soft, a trend that has concerned Federal Reserve officials because it indicates that the economy still is not operating at maximum efficiency.

For the 12 months ended July 31, consumer prices increased 1.7%. That was up from the 1.6% rate for the 12 months ended June 30.


The 12-month rate excluding volatile food and energy costs also was 1.7% through July 31, the same annual pace recorded the previous two months.

Fed policymakers want prices to increase 2% a year, a level that indicates rising wages but that does not cause the economy to overheat.

A tightening labor market should be helping to increase inflation, but that has yet to happen consistently in the recovery from the Great Recession.

The annual inflation rate as measured by consumer prices has been moving down since the winter after climbing above 2%. Without a significant reversal, the data could lead Fed officials to hold off on future increases in a key short-term interest rate.

Fed policymakers prefer a different measure of inflation that is based on personal consumption expenditures and tends to run lower than the consumer price index.

The personal consumption expenditure price index was flat in June, the latest data available.


For the 12 months ended June 30, that index increased just 1.4% after the annual rate had been near 2% earlier in the year. Excluding food and energy prices, the index was up 1.5%.

Fed Chairwoman Janet L. Yellen has said the recent slowdown in inflation was mostly due to temporary factors, such as reductions in the costs of cellphone plans.

In Friday’s consumer price report, the Labor Department said food costs increased 0.2% last month after being flat in July.

The increase more than offset a 0.1% decline in energy prices.

Twitter: @JimPuzzanghera