June Sees 0.2% Climb in Prices of American Consumer Goods

According to a statement released by the US government on Wednesday, the prices of consumer goods rose by 0.2 percent in June 2007. The rise was specifically more on food items. Offsetting this to an extent was a fall in gasoline and other energy prices.

Government sources associate the price rise with a corresponding rise, at the same pace, in the core inflation rate. While analysts at Wall Street had predicted a 0.1% increase in the consumer price index (CPI), the projection made by the Labor Department was marginally stronger.

Economists believe the core inflation rate better highlights than anything else the trends in inflation today. In that sense, the core rate in the June calculations must be some relief for the Federal Reserve. One of the key concerns of the Federal Reserve, stated quite openly, is inflationary pressure, and the low numbers predicted for June must be highly encouraging.

Taking into account numbers from over the past year, unadjusted figures at the Labor Department showed hikes in the consumer and core prices, to the tune of 2.7 and 2.2 percent respectively, in the month of June. The CPI showed a 0.7 percent hike in May, a result of rising prices in the energy sector.

However, June saw a drop in the energy price index, falling by 0.5 percent. This was after a sharp increase throughout the previous quarter. There was also a decline of 0.9 percent in oil-based energy prices.

The food CPI saw happier times during the same period, on the other hand. This index saw a growth by 0.5 percent. The prices of grocery store food also saw a hike of sorts, moving upwards by 0.6 percent.

The annual rates, which are adjusted seasonally, saw a 5.2 percent rise in consumer prices during Q2 2007. This was an escalation from the 4.7 percent rate in Q1 2007. The annual rate till date has also gone up to 5.0 percent, against the 2.5 percent hike during 2006.

In the words of Stephen Gallagher, economist at Societe Generale, while the moderate core inflation rate should be good news for the Federal officials, there still is no evidence that this low inflation rate will be for a sustained period. He said this is what the June FOMC policymakers’ statement talked about.

The timing of the report on inflation has been ‘curious’, to use a mild word. It has come just before the chairman of the Federal Reserve, Ben Bernanke, puts forth the view of the central bank on the American economy in the middle of the year.