US inflation cools on smaller gas price hike

Food prices rose 0.5% after increasing 0.4% in July.

The US inflation rate decelerated slightly in August as gasoline prices rose at a more modest pace and the cost of buying a new car held flat,the Labor Department said on Thursday.

The Labor Department said its Consumer Price Index increased 0.4 per cent last month,after rising 0.5 per cent in July.

The reading was higher than analysts’ forecasts of a 0.2 per cent rise,with food prices posting their biggest gain since March.

Gasoline prices climbed 1.9 per cent after jumping 4.7 per cent the prior month. Food prices rose 0.5 per cent after increasing 0.4 per cent in July.

Core CPI – which excludes food and energy — rose 0.2 per cent after rising at the same rate in July. Last month’s gain was in line with economists’ expectations.

Given limited pricing power for producers as consumers grapple with a 9.1 per cent unemployment rate,inflation is not regarded as a threat now for an economy which barely grew in the first half of the year.

The core index was held back by new auto costs,which were unchanged for the second straight month. New car prices had risen relatively sharply in May following a March earthquake disaster in Japan that disrupted global supply chains.

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In the 12 months through August,core CPI increased 2.0 per cent — the biggest rise since November 2008. This measure has rebounded from a record low of 0.6 per cent in October 2010. Overall consumer prices rose 3.8 per cent year-on-year,the most since Sept. 2008.