Inflation Back Up to 2 Percent Annual Rate

The Labor Department reported that overall consumer prices in the U.S. rose by 0.2 percent from June to July and that the official annual rate of inflation now stands at 2.0 percent, up from just 1.1 percent as recently as three months ago.

Rising costs for both energy products and housing were primarily responsible for the upward trend, however, year-over-year price comparisons will soon see downward pressure as big monthly increases from last August and September (as indicated below) will roll out of the calculation in the months ahead.

A full one percentage point of the current 2.0 percent inflation rate came last summer when prices rose 0.5 percent in August and again in September, so, absent a similar surge this year, the inflation rate will go down when August prices are reported next month.

Apparel prices rose 0.6 percent last month and, though gasoline prices jumped 1.0 percent, this was largely offset by declining electricity and natural gas costs as the energy price index rose by just 0.2 percent. On a year-over-year basis, energy prices are up 4.7 percent, by far the biggest factor behind the increase in the overall inflation rate.

Due largely to a sharp increase in the food and vegetables index, food prices rose 0.1 percent in July and were up 1.4 percent from a year ago. Excluding both food and energy, prices rose 0.2 percent last month and are 1.7 percent higher than last year at this time.