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Financial News: U.S. Consumer Price Growth Exceeds Estimates In July

U.S. Consumer Price Growth Exceeds Estimates In July

08/12/2020 - 09:14:00 (RTTNews)

(RTTNews) - Consumer prices in the U.S. increased by more than anticipated in the month of July, according to a report released by the Labor Department on Wednesday.

The Labor Department said its consumer price index climbed by 0.6 percent in July, matching the increase seen in June. Economist had expected consumer prices to rise by 0.3 percent.

The stronger than expected consumer price growth was partly due to a continued spike in energy prices, which surged up by 2.5 percent in July after soaring by 5.1 percent in June. Gasoline prices continued to lead the way higher.

However, the jump in energy prices was partly offset by a pullback in food prices, which fell by 0.4 percent in July after rising by 0.6 percent in July. Prices for food at home tumbled by 1.1 percent.

Excluding food and energy prices, core consumer prices still advanced by 0.6 percent in July after inching up by 0.2 percent in the previous month. Core prices were expected to edge up by another 0.2 percent.

Core consumer prices showed their biggest increase since January of 1991, partly reflecting another jump in prices for motor vehicle insurance, which skyrocketed by 9.3 percent in July after spiking by 5.1 percent in June.

Prices for shelter, communication, used cars and trucks, and medical care also increased in July, while prices for recreation declined.

The report also said the annual rate of consumer price growth accelerated to 1.0 percent in July from 0.6 percent in June. Core prices were up 1.6 percent year-over-year following a 1.2 percent increase in the previous month.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said the increase in consumer prices "should end any speculation that the pandemic-related slump in demand will quickly push the economy into a deflationary spiral."

"But this is not a sign that the U.S. is instead about to experience a bout of much high inflation because of supply restrictions," Ashworth said. "It mainly reflects a recovery in the prices of goods and services that were most affected during the early stages of the pandemic."

On Tuesday, the Labor Department released a separate report showing U.S. producer prices also climbed by more than expected in the month of July.

The Labor Department said its producer price index for final demand rose by 0.6 percent in July after dipping by 0.2 percent in June.

Excluding food and energy prices, core producer prices climbed by 0.5 percent in July after falling by 0.3 percent in June. Economists had expected core prices to inch up by 0.1 percent.

Compared to the same month a year ago, producer prices in July were down by 0.4 percent following a 0.8 percent decrease in June.

The annual rate of growth in core producer prices accelerated to 0.3 percent in July from 0.1 percent in the previous month.

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