US consumer prices jump in July 2020, pushed by cars

United States inflation is picking up pace as consumer prices jumped 0.6% again in July, mirroring the June increase, and driven up by new and used car prices, government data showed on Wednesday, August 12.

After plunging in the first two months of the coronavirus pandemic, the consumer price index (CPI) has roared back, posting a gain that was double what economists had been expecting, the Labor Department reported.

Falling oil prices had been keeping a lid on the overall price gains, but the energy index rose 2.5% last month, according to the report.

Food prices however continue to decline, falling 0.4% compared to June.

Excluding the volatile food and energy components, the “core” CPI gained 0.6% in July – the biggest increase in this closely-watched measure since January 1991.

Overall inflation gained 1% over the past 12 months, with so-called “core” inflation up 1.6% – still far below the Federal Reserve’s 2% target.

With businesses reopening after months of COVID-19 shutdowns, the world’s largest economy seems to have avoided a spiral of falling prices, which would deter investment and potentially slow the recovery.

“Consumer prices continue to rebound from the pandemic shock, but there’s still a long way to go to a full recovery,” said Oren Klachkin of Oxford Economics.

Klachkin noted that the Fed’s 2% inflation goal will remain elusive “until a vaccine or therapeutic is found and virus fear has faded.”

New vehicle prices rose 0.8% in July and new cars jumped 2.3% in the month, according to the data.

Rent rose just 0.2%, and medical services were up 0.5% – the same increase posted in June – while airline fares increased 5.4%.

Meat, poultry, and fish prices plunged 2.8%, while dairy products dropped 0.8%, but food in restaurants rose 0.5%. – Rappler.com