US consumer prices push higher for second consecutive month

Shoppers wearing protective masks queue at a shop in Soho, New York, the US, August 6, 2020. Picture: NINA WESERVELT/BLOOMBERG

The jump in prices is probably an unwinding of sharp declines experienced when non-essential businesses were shuttered in mid-March to slow the spread of the coronavirus. The higher prices further dispel fears of deflation, a decline in the general price level that is harmful during a recession as consumers and businesses may delay purchases in anticipation of lower prices.

Excluding the volatile food and energy components, the CPI jumped 0.6% last month as the cost of vehicle insurance surged a record 9.3%. That was the largest gain in the core CPI since January 1991 and followed a 0.2% rise in June. In the period, the core CPI advanced 1.6% after increasing 1.2% in June.

The Fed tracks the core personal consumption expenditures price index for its 2% inflation target. The core PCE price index rose 0.9% year on year in June. Economists expect July data, which will be released later in August, will show the core PCE price index rose about 1.4%. Stocks on Wall Street were trading higher, with the S&P 500 index edging towards a record high. The dollar fell against a basket of currencies. US Treasury prices were trading mostly lower.In July, fuel prices advanced 5.6% after soaring 12.3% in June. Food prices fell 0.4%, the first decrease since April 2019, after rising 0.6% in June. The cost of food consumed at home dropped 1.1%, with beef prices tumbling 8.2% after surging in recent months.

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