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Cost of living rises higher than forecast for August

WASHINGTON — The cost of living rose more than forecast in August as consumers paid more for food, energy and housing.

The consumer price index increased 0.4 percent after a 0.5 percent gain in July, figures from the Labor Department showed Thursday in Washington. The so-called core gauge, which excludes volatile food and fuel prices, climbed 0.2 percent for a second straight month.

"There has been more momentum in underlying inflation than many had expected," said Jeremy Lawson, a senior U.S. economist at BNP Paribas in New York. Still, "inflation won't be a constraint on Fed policy. The Fed will be focused on the real economy; they know inflation will be moderating."

Applications for unemployment benefits unexpectedly rose last week to the highest level since the end of June, underscoring a struggling labor market, the Labor Department also said. Jobless claims climbed by 11,000 to 428,000 in the week ended Sept. 10 that included the Labor Day holiday.

Thursday's consumer price report also showed inflation- adjusted hourly wages fell 0.6 percent in August, the most since July 2008, and were down 1.9 percent from the same month a year ago.

Overall consumer prices increased 3.8 percent in the 12 months ended in August, matching the year-over-year gain the prior month. The core CPI rose 2 percent from August 2010. The Fed's informal target range for longer-term core inflation is 1.7 percent to 2 percent as measured by a Commerce Department gauge tied to consumer spending.

Thursday's report showed energy costs increased 1.2 percent from a month earlier. Gasoline prices climbed 1.9 percent and were up 32 percent from a year earlier.

The consumer price report follows Fed chief Ben Bernanke's comments last week to the Economic Club of Minnesota that central bank officials expected inflation to slow as prices for oil and other commodities ease.

Food costs rose 0.5 percent, driven by higher dairy, meats, fruits and vegetable prices.

The cost of medical care rose 0.2 percent. Costs of passenger cars were unchanged, while used vehicle prices increased 0.9 percent. Apparel costs climbed 1.1 percent, the most since March.

Recent data have shown the U.S. economy is stumbling. Retail sales were unchanged in August, the economy generated no jobs and hourly earnings fell.

Lowe's, the second-largest U.S. home-improvement retailer, has been negotiating with vendors to minimize costs while passing some increases onto consumers.

"Our approach is to negotiate as hard as we can to the lowest cost possible," Robert Gfeller, executive vice president for merchandising at Lowe's, said Sept. 7. "Where we have taken (increased) pricing, we have moved some through to retail."

.fast facts

The breakdown

Overall consumer prices increased 3.8 percent in the 12 months ended in August. Below are costs compared to a month earlier:

Energy: up 1.2 percent

Gasoline: up 1.9 percent

Medical care:

up 0.2 percent

Passenger cars: unchanged

Used vehicles:

up 0.9 percent

Apparel: up 1.1 percent

Food: up 0.5 percent

Cost of living rises higher than forecast for August 09/15/11 [Last modified: Thursday, September 15, 2011 9:50pm]
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