Consumer prices creep up 0.3% in June
WASHINGTON — Consumer prices rose in June at a slightly slower pace than in May with two-thirds of the June advance driven by the largest jump in gasoline prices in a year.
Prices rose 0.3 percent in June following a 0.4 percent rise in May, the Labor Department reported on Tuesday. The May increase had been the biggest one-month gain in more than a year.
Energy prices were up 1.6 percent, nearly double the May gain, reflecting a sharp 3.3 percent rise in gasoline costs. But food costs edged up just 0.1 percent, the smallest gain since January.
Core prices, which exclude volatile food and energy, were up just 0.1 percent. Over the past 12 months, core prices are up 1.9 percent, an indication of moderate inflation.
Overall prices have risen 2.1 percent in the past 12 months. While the 12-month price gains are up from extremely low readings earlier this year, the figures are close to the 2 percent annual price gains that the Federal Reserve seeks to achieve.
The 3.3 percent jump in gasoline costs was not expected to be repeated in July, given that pump prices have been falling in recent weeks. The AAA says the nationwide average for a gallon of gas stood at $3.57 on Monday, down from $3.68 a month ago and an indication that energy prices may be easing slightly.
“World oil prices were relatively elevated in June since there were significant fears that the turmoil in Northern Iraq would spread to the southern parts of that country,” said Chris G. Christopher Jr., director of consumer electronics at IHS Global Insight. He predicted energy prices will moderate in coming months.
Food costs have been rising sharply this year because of factors ranging from cold weather hurting winter crops in such states as Florida to a severe drought in California.
Airplane ticket prices surged by 5.8 percent in May, the largest amount in 15 years, but ticket prices moderated to a smaller 0.4 percent rise in June.
Economists expect energy price gains will slow in coming months although tensions in the Middle East and Ukraine could derail those hopes if they trigger a surge in global oil prices.
Food costs have been driven higher this year by a variety of factors including a harsh winter and a drought in California, but economists say the June moderation could be the beginning of slower food increases.
The Federal Reserve is expected to keep interest rates exceptionally low as long as inflation does not show signs of moving beyond its targeted rate. The forecast of many analysts is that the Fed will keep a key short-term interest rate at a record low near zero over the next year with the first rate increase not occurring until the summer of 2015.
But analysts stress that this outlook depends heavily on prices remaining in check. Should there be signs that inflation is starting to accelerate, then the central bank could begin raising interest rates sooner, possibly in the spring of next year.