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story.lead_photo.caption In this June 26, 2019 photo, a man adds fuel to his vehicle with the price of gas displayed at the pump at a gas station in Orlando, Fla.(AP Photo/John Raoux)

WASHINGTON -- U.S. consumer prices rose just 0.1% in June, as cheaper gas prices were offset by higher rents and auto costs.

The Labor Department said Thursday that the consumer price index increased 1.6% in June from a year earlier. That is down from 1.8% in May and the second-straight drop. However, excluding the volatile food and energy prices, core inflation rose 0.3% in June, the biggest increase in 18 months. It rose 2.1% from a year ago.

Inflation has been muted throughout the 10-year expansion, now the longest on record, even as the unemployment rate has dropped to a low 3.7%. Federal Reserve Chairman Jerome Powell cited persistently low inflation on Wednesday as a justification for potentially lowering short-term interest rates at the Fed's next meeting at the end of the month.

Typically, such a low jobless rate would force employers to offer higher pay to attract and keep workers. Businesses, in turn, would raise prices to offset the cost of higher wages. But that dynamic has not fully kicked in during the current expansion, and inflation has been stuck below the Fed's 2% target nearly the entire seven years since the Fed settled on that figure, according to a separate measure the Fed prefers.

Powell had previously described low inflation as transitory, but did not do so in his comments during a hearing of the House Financial Services Committee. Instead, he highlighted the fact that low unemployment wasn't pushing up wages quickly enough to lift prices, and suggested that meant hiring and economic growth could continue without fear the economy would overheat and push up inflation. That gives the Fed more room to cut rates.

In June, core inflation was pushed up by higher rents and a 1.6% jump in used-vehicle prices, which followed four-straight months of decline. Clothing prices rose 1.1%.

"Despite the fact that core prices were a little bit stronger than expected, I don't really see this as a sign of any resurgence in inflation," said Gregory Daco, chief U.S. economist at Oxford Economics. The data still support the Fed's preferred inflation measure undershooting its 2% target in the second half of the year and "therefore support the dovish stance" when policymakers gather.

Some of the increase in core prices was likely temporary. The cost of household services jumped 0.8%, the most in nearly 30 years, as lawn and garden service costs soared 6.1%, the most since December 1997.

Food prices were unchanged, and gas prices fell 3.6%, the second-straight sharp decline. The cost of electricity also fell 0.8%, lowering overall inflation.

A separate report Thursday from the Labor Department showed filings for unemployment benefits fell to the lowest level since mid-April, adding to signs of a robust job market.

Jobless claims dropped by 13,000 to 209,000 in the week that ended Saturday, below all estimates in a Bloomberg survey of economists that had projected 221,000. The reporting period included the Fourth of July holiday, which may add to the volatility of the readings.

Another Labor Department report Thursday showed how inflation is affecting consumer spending power. Average hourly earnings, adjusted for price changes, rose 1.5% from a year earlier after a 1.3% gain in May.

Information for this article was contributed by Christopher Rugaber of The Associated Press and by Reade Pickert of Bloomberg News.

Business on 07/12/2019

Print Headline: Shopper prices up 0.1% in June

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