August CPI Posts Biggest Gain In Four Months

By John S. McClenahen Following three months in which it showed little or no change, the U.S. Labor Department's Consumer Price Index (CPI) advanced 0.3% in August. It was the largest increase in the closely watched measure of inflation since April's 0.5% increase. Higher costs for energy were a factor. Up 0.6% in August, energy costs increased for the second consecutive month -- though they clearly weren't the only culprit. The so-called "core" CPI, which excludes the relatively volatile month-to-month changes in prices for food and energy, rose 0.3% in August, its biggest monthly increase since April. Nevertheless, August's CPI rise "does not reflect a new upward trend," insists Karen Dexter, an economist at Merrill Lynch & Co., New York. She figures that minus gasoline, tobacco and apparel, the CPI was up just 0.1% -- and that minus apparel and tobacco, the core CPI also was up just 0.1%. "We still believe that inflation is a non-issue," states Dexter. Even with a higher rate of inflation, real earnings rose 0.3% from July to August of this year, other Labor Department data show. And between August 2001 and August 2002 average weekly earnings rose 3.1%, the department reports.

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