U.S. consumer prices rose 0.6% in July, matching June uptick

Andrew Cummings
August 13, 2020

Consumer price inflation increased 0.6% on the month, unchanged from June and higher than the 0.3% rise expected by analysts.

US consumer prices jumped in July, but weak demand and the lapse in enhanced unemployment benefits will keep inflation under control, economists said.

The extra 600-U.S. -dollar weekly unemployment benefit for the unemployed, which benefited almost 30 million Americans, expired at the end of July, as Republican and Democratic lawmakers failed to reach a deal over the next COVID-19 relief bill.

The Labor Department reported Wednesday that the increase last month in its consumer price index matched a 0.6% rise in June. "PPI has been in the negative in 12 out of 13 months to July". That was the biggest gain since October 2018 and followed a 0.2% decline in June.

Job growth slowed significantly in July and at least 31.3 million people are on unemployment benefits.

The economy, which entered recession in February, suffered its biggest blow since the Great Depression in the second quarter, with gross domestic product dropping at its steepest pace in at least 73 years. Used auto prices were up 2.3% while new vehicle prices rose 0.8% - the gains were the most since 2010 and 2011, respectively. Still, so-called core inflation is only up 1.6% from a year earlier. The dollar slipped against a basket of currencies. Prices of U.S. Treasuries were down. Wholesale gasoline prices increased 10.1% after advancing 26.3% in June.

In annual terms, the cost of alcoholic beverages and tobacco (up 6.5%), communications (up 5.7%), recreation and culture (up 5.4%), and food and non-alcoholic drinks (up 4.3%) rose most. And "higher food prices are obviously unwelcome just now and stretch consumers' limited budgets". But the cost of food consumed away from home rose 0.5%. A 0.4% increase in the prices for services, excluding trade, transportation, and warehousing, accounted for about 60% of last month's rise.

President Donald Trump last weekend signed an executive order stopping evictions from rental housing that has federal financial backing.

The cost of services rebounded 0.5%, the largest gain since April 2019, after dropping 0.3% in June.

"The index for motor vehicle insurance increased sharply in July, as it did the previous month".

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