Consumer Prices Hold Steady for Third Time in Four Months

consumers shopping

WASHINGTON -- U.S. consumer prices were unchanged in July from June, as a small drop in energy costs offset slightly higher food prices. The consumer price index hasn't changed since March, evidence that the weak economy is keeping inflation in check.

Core consumer prices, which exclude volatile food and energy costs, ticked up 0.1 percent last month, the Labor Department said Wednesday. More expensive medical costs, clothing and rents pushed up core prices.

Prices increased 1.4 percent in the 12 months ending in July. That's down from 1.7 percent in June and is the smallest yearly increase in 20 months. Core prices have increased 2.1 percent in the past year, down from a 2.2 percent pace in June.

Lower inflation gives the Federal Reserve more leeway to launch new programs intended to rekindle the economy.

The Fed signaled at a meeting in late July that it is ready to act if growth and hiring stays weak. That led many economists to predict the Fed would announce a third round of bond purchases designed to push long-term interest rates down and generate more borrowing and spending in the economy.

But recent sign point to some economic improvement in July. Employers added the most jobs in five months, while consumers increased their retail spending after three months of declines. A slightly better outlook for the economy could prompt the Fed to hold off on taking action when its policy committee next meets in September.

Mild price increases also leave consumers with more money to spend, which can boost economic growth. Food prices increased only 0.1 percent in July.

But the low prices may not last. A severe drought in the U.S. Midwest has damaged corn, soybeans and other crops, which will likely push up a range of food prices on grocery store shelves in the coming months. Corn is used in many processed foods, from cereals to soda. And both corn and soybeans are used in animal feed, so higher costs for those grains will likely push up meat prices.

Wholesale food prices rose 0.5 percent in July for the second straight month, the government said Tuesday. Wholesale corn prices jumped 34.5 percent, the largest gain since Oct. 2006.

Gas prices have also increased recently after falling from a peak near $4 a gallon in April. The average national price for gas was $3.71 a gallon on Wednesday. That's up 31 cents from a month ago.

Slow economic growth is keeping a lid on price increases. The economy expanded at just a 1.5 percent annual rate in the April-June quarter, down from 2 percent in the January-March quarter and 4.1 percent in the final three months of last year.

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Frank, you are dead on! How can the government tell us that inflation is low when food, gas, utility costs, rent, and many other things are up by double digits? How stupid are we?

August 17 2012 at 9:16 AM Report abuse rate up rate down Reply

Does anyone in Washington do their own shopping. Mr . Bernacki you are doing a great job of destroying the middle class , driving retired citizens to the poorhouse , and making the savings of millions worthless. Thank you government !

August 15 2012 at 6:35 PM Report abuse rate up rate down Reply

I don't know who this auther think he's kidding. Flat prices?!? The cost of gas has gone up 30 cents in a month with no end in sight, even though a barrel of oil is still $50 less than the last time gas prices were so high. Everytime I buy bulk items at CostCo, the price is up $1 to $3 dollars. Items in packages continue to shrink while the package remains the same in size. Stella Dora annesette toast cookies are now about 2/3 the size of a year ago, while the price remains the same. If that isn't a price increase I don't know what is. The amount of coffee in a container continues to shrink. Oh. to anyone who might read this. Whoever buys Dunkin' Donuts coffee in the supermarket at $9 a pound is nuts.

August 15 2012 at 2:43 PM Report abuse rate up rate down Reply

does anyone really believe there has been no significant increase in the cpi over the last four years!!!!!

August 15 2012 at 2:41 PM Report abuse -1 rate up rate down Reply

You know why they are flat - so they don't have to give a "real" cost of living increase to Social Security - we all know that prices are going up every week.

August 15 2012 at 2:33 PM Report abuse rate up rate down Reply

The Magic Kool Aid is working. O

August 15 2012 at 2:29 PM Report abuse rate up rate down Reply

"The best customer of American industry
is the well paid worker."

August 15 2012 at 2:17 PM Report abuse rate up rate down Reply

Does anybody believe this ?? Have you noticed how the sizes of food and all packages have gotten smaller and the prices went up at the same time? Look at the amount of ice cream in a 1/2 gallon package--no 1/2 gal!! . The cartons of orange juce has been reduced from 64 oz to 57 oz. Cereal and chip pakages are the same size as before but contain less product. Canned tuna looks the same size but is 2 oz less. Coffee was 1 pound and now the same size package has 12 oz. These are but a few examples of the "trickery" and "misleading" packaging being used to hold prices down!! Do they think we are stupid or blind?? Whomever writes these stories and does these studies need to give us "truth"!!

August 15 2012 at 2:12 PM Report abuse rate up rate down Reply
1 reply to Charles's comment

Great Post....The wonderful american government is trying to convince non-thinkers that there is no inflation!!!

August 15 2012 at 2:44 PM Report abuse rate up rate down Reply

It's an election year, what do you expect!

August 15 2012 at 2:01 PM Report abuse rate up rate down Reply

As usual, just another psych article to try to get people to spend their money.

As for me. I'd much rather keep my $$$ in my own pocket, as opposed to putting in someone else's.

August 15 2012 at 1:22 PM Report abuse +1 rate up rate down Reply
1 reply to donovansdanes's comment

i dont see what they are saying here, my shopping cart is getting smaller every time i go to the store. i think they say this just to make it look like the economy is getting better, also have you heard that motorola is laying off 4,000 people? and they say they are creating jobs? where?

August 15 2012 at 1:51 PM Report abuse -1 rate up rate down Reply