Consumer prices shot up last month at twice the expected rate, pushed higher by surging energy and food costs. The latest surge left inflation...
WASHINGTON — Consumer prices shot up last month at twice the expected rate, pushed higher by surging energy and food costs. The latest surge left inflation running at the fastest pace in 17 years.
The Labor Department reported today that consumer prices rose by 0.8 percent last month, twice the 0.4 percent gain that economists had been expecting.
It marked the third straight month of oversized inflation increases following jumps of 0.6 percent in May and 1.1 percent in June. And it leaves inflation rising by 5.6 percent over the past year, the biggest 12-month gain since January 1991.
Core inflation, which excludes volatile food and energy costs, rose 0.3 percent in July, slightly higher than the 0.2 percent increase that economists had expected. For the past 12 months, core inflation has risen by 2.5 percent, the highest 12-month change since February.
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The inflation surge presents a major problem for the Federal Reserve: Will inflation force it to start raising interest rates even as the economy struggles to avoid a recession?
Some economists said this could be the last truly horrible inflation report, noting that energy prices have been falling since hitting a peak last month. Others worried that the July report could be a signal that inflation is not going to moderate as quickly as had been expected because the surge in energy prices is now starting to spread to other sectors of the economy.
“The battering of consumers continues as prices are rising for just about everything,” said Joel Naroff, chief economist at Naroff Economic Advisors. “If you think things are going to get a lot better with the drop in petroleum prices, think again. The increases (in July) were broad-based.”
The core inflation figure was driven higher by a big 1.2 percent jump in clothing costs, the biggest increase in this area since August 1998. Airline-ticket prices, which have been surging because of higher fuel costs, jumped another 1.3 percent last month.
The big rise in inflation left consumers even more squeezed. The Labor Department said that average weekly earnings, after adjusting for inflation, fell by 3.1 percent in July compared with a year ago, the biggest year-over-year decline since November 1990.
The Labor Department also reported that the number of newly laid off workers filing for unemployment benefits fell by 10,000 last week to 450,000. The decline was less than expected and showed the labor market remains under severe stress from the weak economy. The four-week average for claims rose to the highest level in six years.