Economic reports released Friday, August 13, reinforced the concern that the recovery was faltering. The Consumer Price Index (CPI) rose in July, though inflation was still tame, and retail sales nudged higher but were disappointing behind the headline number.
The CPI was up 0.3% in July, the Labor Department reported, though without a 4.4% increase in the price of gasoline, the overall rise was much tamer. Excluding volatile food and energy prices, the core prices increased 0.13%. Over the past year, prices have risen 1.2%, the slowest pace in 44 years. Consistent, very low inflation, though, in a sputtering economy, means wages remain muted as well as prices for goods, which could push the economy into a deflationary cycle.
Ian Shepherdson, chief U.S. economist for High Frequency Economics in Valhalla, New York, said in an analyst note that the overall rise was only a tenth more than consensus estimates and the core rise was as expected.
“The core index rose by 0.13%, thanks to 0.1% increases in rents, both primary and OER, a 0.8% rise in used car prices (still catching up with auction prices but nearly done now), a 0.6% rise in apparel and a 1.6% increase in tobacco, the third straight hefty gain,” Shepherdson said in the note. “Medical costs and recreation fell slightly. With rental vacancy rates stabilizing we think the extreme downward pressure on rents is over, but other core components can slow further.”
The other closely watched report was retail sales for July, which rose 0.4% last month, the Commerce Department said. The overall number was not too bad, but when removing auto purchases, sales fell 0.1%, which added even more concern for retailers as they geared up for the important back-to-school shopping month in August.