Inflation Rises to 0.1% in July

Inflation Rises to 0.1% in July

Last month, gasoline prices rose 0.9 percent after rising 3.4 percent in June.



Food and drink prices rose 0.9 percent, driven mainly by a 2.8-percent increase in prices at restaurants and bars.

While inflation remains soft, a strengthening economy, marked by a tightening labor market and a firming housing sector, should give the US central bank confidence it will gradually move toward its 2 percent target, economists said. Food price inflation rose to 3.6% y/y in June, its most rapid pace in over a year.

“Fed officials made clear that they do not need to see higher inflation before hiking”, RBS chief economist Michelle Girard said. Prices in recreation & culture have declined by 0.5% y/y while prices of clothing & footwear are down by 1.5% y/y.

Analysts believe the figure could still return to negative territory in the coming months as the fall in the price of oil works its way through the statistical system.

For the 12 months ended July 31, consumer prices increased 0.2%.

In its turn, CPI grew by 1.4% for the past year and consumer deflation of 2.3% was accumulated.

Fed policy makers have twin goals of maximum sustainable employment and inflation of around 2 percent, progress toward which will dictate when, and how often, they’ll raise interest rates. Before it acts, the Fed is seeking signs of a pickup in annual inflation, which has been running below its 2% target partly because of low gasoline prices and a strong dollar that’s making imports cheap for consumers. Inflation in food prices has been the largest source of overall inflation in the last three months, but remains relatively subdued. “Indeed, with inflation muted and another wave of austerity set to hit the economy, we still think the MPC will hold off from raising interest rates until Q2 2016 and will increase Bank Rate to just one per cent by the end of next year”. Exports jumped 7.6%, a smaller gain than in June but more than expected.

But from a year earlier, real average weekly earnings fell 0.1 per cent.

This fall has been passed on to consumers, and recent weeks have seen a flurry of price cuts on forecourts, with the average price of diesel falling to its lowest level in five years at less than 113p a litre.

Leave a Reply