Consumer Prices Rise on Energy Costs

Consumer Prices Rise on Energy Costs
By JACK HEALY
Copyright by The New York Times
Published: September 16, 2009
http://www.nytimes.com/2009/09/17/business/economy/17econ.html?hpw


The rising cost of gasoline pushed overall consumer prices higher in August even as prices for most other goods and services remained in check, the government reported on Wednesday.

The Labor Department’s consumer price index rose 0.4 percent last month after hovering unchanged in July, a sign that inflation is gradually edging back into the economy, though not nearly as fast as some investors have predicted. Prices for housing, food and recreation were up slightly, and prices for new cars and clothing fell from a month earlier.

Prices of all other items except food and energy — the so-called core rate of inflation — rose only 0.1 percent in August, suggesting that most costs of living are not following the upward arc of oil and gasoline prices.

Over all, core prices were 1.4 percent higher than last August. Health care costs, now the focus of intense debate in Washington, rose for another month, and are among the few areas of consumer spending that did not dip even for one month as the economy tumbled into recession. Medical costs crept up by a seasonally adjusted 0.3 percent in August, and were 3.3 percent higher than a year earlier.

Energy prices rose 4.6 percent last month, even though they were nearly one-fourth lower than the period a year ago, when oil prices began to tumble from their record highs of $145 a barrel.

Some investors are making big bets that heavy government spending and a nascent rebound in the economy will touch off another round of inflation, pushing commodity prices sharply higher and further eroding the value of the dollar. These inflation hawks have helped push the price of gold above $1,000 recently.

But the Federal Reserve still expects inflation to remain in check this year as the United States clambers out of a deep recession. Unemployment is still high, consumer demand for credit and goods and services is still subdued, and there is enormous slack in the economy.

But slowly, that excess is fading. The Federal Reserve noted Wednesday that mines, utilities and manufacturing businesses ran at a slightly higher capacity in August, bolstering hopes that new orders and an upswing in business were prompting factories to speed up their assembly lines, add shifts and increase output. The percentage of capacity used rose to 69.6 last month, from 69 percent in July.

And industrial output increased for a second month, rising 0.8 percent after an increase of 1 percent in July. Production of consumer goods, business equipment and materials rose. In another report on Wednesday, the Commerce Department said that the deficit in the current account, the broadest measure of foreign trade, dropped to $98.8 billion in the second quarter. The amount represented 2.8 percent of the total economy as measured by the gross domestic product.