Auto and clothing prices rose in June

The cost of living fell last month for the first time in a year, mainly because of lower gasoline prices, but another key measure of inflation increased in a worrisome sign.

The consumer price index fell a seasonally adjusted 0.2% in June, matching expectations on Wall Street.

Energy costs sank 4.4% — the largest decline since December 2008 — as the prices of gasoline and household electricity decreased.

Gas prices fell 6.8% and electricity declined 1.6%, the biggest drop in 14 years. The cost of food rose 0.2%, but it was the smallest monthly increase in 2011.

However, using a different measure of inflation that strips out food and energy, the prices paid by consumers rose a larger-than-expected 0.3% last month. Economists were expecting a 0.2% increase in what’s known as the core rate.

Core CPI, which is closely watched by the Federal Reserve, was boosted by higher prices for housing, clothes, medical care and new and used vehicles. Airline fares sank 3%.

Even with oil prices easing, economists say core inflation could continue to rise over the next few months because of spillover effects. The prior spike in oil prices and other commodities has added to the costs of a wide range of consumer goods and services.

“The drop in gasoline prices helped consumers a lot, but inflation continues to spread more generally across the economy,” said Joel Naroff of Naroff Economic Advisors.

Bartash writes for MarketWatch.com/McClatchy.