US CONSUMER prices climbed at twice the rate expected in July and job prospects kept softening last week, according to Labour Department reports yesterday that pointed to swelling economic stress.
The department’s Consumer Price Index (CPI), the most commonly-used inflation gauge, rose 0.8 per cent in July and on a year-over-year basis jumped 5.6 per cent, its strongest advance since January 1991 when the first Gulf War was taking place.
Costlier energy and food helped to push July prices up, but since that time, oil prices have begun to decline and analysts hope that July might mark a watershed on inflation pressures.
“If we don’t get an unexpected shock that pushes commodity prices back up, this might be the worst inflation news that we’ll get for a while,” said Gary Thayer, senior economist with Wachovia Securities.
Core consumer prices, which exclude food and energy items, gained 0.3 per cent in each of June and July and rose 2.5 per cent last month on a year-over-year basis.
“It is certainly above expectations here, but I think we’ve probably seen, for the near-term anyway, the worst of the inflation readings,” said Keith Hembre, chief economist for First American Funds.
The dollar rose and treasuries fell after the data but quickly reversed course, with the dollar standing little changed on the day and government bond prices higher. Stock futures were lower.
US job markets are also severely strained, adding to the burden on consumers who fuel two-thirds of economic activity through their purchases of goods and services.
In a separate report, the Labour Department said another 450,000 workers filed new claims for jobless benefits last week, down 10,000 from a week earlier but still at levels that are associated with recession.
In fact, a four-week moving average of new jobless claims that is regarded as a better gauge of underlying labour trends because it irons out week-to-week volatility climbed to 440,500 from 421,000 the week before.
That was the highest reading for the moving average in more than six years, since it hit 445,500 in April 2002.
The CPI report showed energy prices kept pushing higher, rising 4 per cent in July after a 6.6 per cent June gain.
That put energy costs up 29.3 per cent on a year-over-year basis, a fact that motorists who pay 37.9 per cent more for gasoline than a year earlier know painfully well.
Food costs rose 0.9 per cent following a 0.8 per cent June increase, putting them 6 per cent above levels a year ago.
