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Higher gas costs drive up US consumer prices

Associated Press Modified: September 14, 2012 at 10:00 am •  Published: September 14, 2012
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WASHINGTON (AP) — More expensive gas drove up consumer prices in August by the most in three years. But outside energy, inflation was tame.

The Labor Department said Friday that consumer prices rose a seasonally adjusted 0.6 percent last month, the first increase since March. Higher gas prices accounted for 80 percent of the increase. Food prices rose 0.2 percent.

Excluding the volatile food and energy categories, core prices edged up 0.1 percent for the second straight month. Rents, medical care and new cars got more expensive, while clothing, furniture and airline fares fell in price.

Mild inflation leaves consumers with more money to spend, which can boost economic growth. Lower inflation will allow the Federal Reserve to stick with programs announced Thursday aimed at lifting the economy. If the Fed were worried that prices are rising too fast, it might have to raise interest rates.

In the past 12 months, prices have increased 1.7 percent. That's down from a peak of 3.9 percent in September 2011 and below the Fed's inflation target of 2 percent.

Core consumer prices rose 1.9 percent in the past 12 months, the smallest annual increase in a year.

August's prices rose largely because gas prices have jumped in recent weeks. The average price for a gallon of gas nationwide was $3.87 on Friday, up 16 cents in the past month.

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