U.S. Consumer Price Growth Slows More Than Expected In July

(RTTNews) - Consumer prices in the U.S. saw a modest increase in the month of July, according to a report released by the Labor Department on Wednesday, with the pace of growth coming in below analyst estimates.

The Labor Department said its consumer price index edged up by 0.1 percent in July after climbing by 0.3 percent in June and 0.4 percent in May. Economists had expected prices to rise by 0.2 percent.

The uptick in consumer prices was partly due to a 0.2 percent increase in food prices, which came as all six major grocery store food group indexes increased.

Energy prices showed a more modest 0.1 percent increase, with higher gasoline prices partly offset by decreases by the other energy component indexes.

Excluding food and energy prices, the core consumer price index still ticked up by 0.1 percent in July following a 0.2 percent increase in June. Core prices were also expected to rise by 0.2 percent.

The Labor Department said the increase primarily reflected a 0.4 percent advance by the shelter index, although the indexes for medical care and apparel also rose.

A sharp drop in prices for airline fares helped to limit the upside along with lower prices for used cars and trucks, household furnishings and operations, and new vehicles.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "The very muted 0.1% m/m gains in both headline and core CPI in July will certainly give the Fed pause for thought in whether to raise interest rates or not at the next FOMC meeting in mid-September."

"On balance, we still think the Fed will go ahead and raise rates in response to the further improvement in labor market conditions. But the decision is finely balanced," he added. "With price inflation and wage growth still muted, a case can also be made for waiting."

Compared to the same month a year ago, consumer prices were up by 0.2 percent in July, reflecting a slight acceleration from the 0.1 percent growth seen in June.

Meanwhile, the annual rate of growth in core consumer prices came in at 1.8 percent, unchanged from the previous month.

The Labor Department released a separate report last Friday showing that producer prices rose by slightly more than expected in July amid a notable increase in service prices.