Key US inflation measure hits 6-year high in July, up 2.3 percent

By AFP & REUTERS
August 31, 2018

Washington: A key measure of annual US inflation rose last month at the fastest pace seen in six years, pushed by rising energy costs, the Commerce Department reported Thursday.

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The Federal Reserve´s preferred price index, based on consumer spending, rose 2.3 percent in the 12 months ended in July, according to the monthly data, which was the strongest rate since March 2012.

Excluding volatile food and energy prices, the inflation rate also accelerated, rising to 2.0 percent, which hits the Fed´s goal.

With the US economy growing at a brisk pace of 4.2 percent in the second quarter, and unemployment rate at historic low levels, the central bank is watching closely for signs prices are accelerating.

However, Fed officials have said they can tolerate inflation a little above or below the target. The Fed has raised the key lending rate twice this year, and is expected to hike again in September and December.

Energy goods and services surged 13.4 percent compared to July 2017, while goods prices rose only 1.4 percent.

The Personal Consumption Expenditures price index rose just 0.1 percent in July compared to June, and was up 0.2 percent excluding food and energy.

Personal income increased 0.3 percent or nearly $55 billion, while spending jumped 0.4 percent or $49 billion, according to the report.Meanwhile, the number of Americans filing for unemployment benefits rose last week, but the underlying trend continued to point to a robust labor market that should keep the economy on a strong growth path this year.

Initial claims for state unemployment benefits increased 3,000 to a seasonally adjusted 213,000 for the week ended Aug. 25, the Labor Department said on Thursday.

Data for the prior week was unrevised. Claims had declined for three straight weeks.

The Labor Department said only claims for Maine were estimated last week. The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 1,500 last week to 212,250, the lowest level since December 1969.

There are no signs so far in the claims data that the Trump administration´s protectionist trade policy, which has led to an escalating trade war with China and tit-for-tat import tariffs with other trading partners, including the European Union, Canada and Mexico, is hurting the labor market.

The jobs market, which is viewed as being near or at full employment, is steadily raising wage growth, helping to support consumer spending and boost the overall economy.

The economy grew at a 4.2 percent annualized rate in the second quarter, the fastest pace in nearly four years and almost double the 2.2 percent rate notched in the January-March period.

Thursday´s claims report also showed the number of people receiving benefits after an initial week of aid dropped 20,000 to 1.71 million for the week ended Aug. 18. The four-week moving average of the so-called continuing claims fell 4,500 to 1.73 million.

The continuing claims data covered the week of the household survey from which August´s unemployment rate will be derived.

The four-week average of continuing claims declined 15,000 between the July and August survey weeks, suggesting an improvement in the unemployment rate. The jobless rate was at 3.9 percent in July.

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