Victoria Stilwell Washington
THE COST of living in the US climbed in July at the slowest pace in five months, indicating price pressures remain limited even as the economy picks up.
The consumer price index rose 0.1 percent month on month, matching the median forecast of 80 economists, after rising 0.3 percent in June, the Labor Department reported yesterday. Stripping out volatile food and fuel, the so-called core measure also climbed 0.1 percent, less than projected.
Inflation continues to run below the Federal Reserve’s target as sluggish global demand limits companies’ ability to charge customers more.
Restrained increases give the central bank’s policymakers room to keep interest rates low well after the projected end of their bond-buying programme in October.
“Some
of the inflation concerns that you were hearing back in June will probably ease off a little bit,” said Michael Feroli, the chief US economist at JPMorgan Chase.
“It takes some pressure off the Fed to speed up rate normalisation. There had been a lot of rhetoric about the Fed being behind the curve on inflation, and this probably takes some wind out of that.”
Another report yesterday showed housing starts surged in July to an eight-month high, underscoring the recent pick-up in builder optimism and showing more traction in the residential property market.
Beginning home construction climbed 15.7 percent to a 1.09 million annualised rate last month following June’s 945 000 pace, which was stronger than previously estimated, the Commerce Department reported yesterday.
Stock index futures rose after the reports, extending earlier gains.
The contract on the Standard & Poor’s 500 index maturing in September climbed 0.3 percent to 1 972.5 by 8.45am in New York.
Economists’ estimates in the Bloomberg survey ranged from unchanged to a 0.2 percent advance.
Overall consumer prices rose 2 percent in the 12 months to July, following a 2.1 percent year-over-year advance the prior month. The core measure increased 1.9 percent from July last year, the same as in June.
The Fed’s 2 percent inflation goal is based on the Commerce Department’s price gauge that is tied to consumer spending. That measure climbed 1.6 percent year on year in June.
Energy costs decreased 0.3 percent in July from June. The average cost of regular petrol was $3.45 a gallon (R9.66 a litre) on Sunday, down from this year’s peak of $3.70 in April, according to AAA.
Food costs advanced 0.4 percent last month, reflecting broad-based increases.
The core rate reflected increases in rents, new cars and medical care, that were offset by lower costs for airline fares, used cars, tobacco, recreation and furnishings. – Bloomberg