Higher Energy Prices Accelerate CPI

The cost of energy, which had fallen nearly a full percentage point in June, increased 2.9% last month, pushing up the U.S. Labor Department's consumer price index by four-tenths of a percentage point. The rise in the CPI was in line with economists' expectations.

For the first seven months of this year, the CPI, a carefully watched measure of inflation, grew at a seasonally adjusted annual rate of 4.8%, compared with an increase of 3.4% for all of 2005, the department noted when it released the latest data on August 16.

Dramatically higher energy costs are the explanation. Energy prices rose at a seasonally adjusted annual rate of 25.3% during the first seven months of this year, compared with a 17.1% increase for all of 2005.

However, the data also show that taking price changes for food and energy out of the calculation makes a difference. For example, in July, the so-called core CPI, which does not include energy and food, rose just two-tenths of a percent, its smallest increase in five months and one-tenth percent lower than the three-tenths increase economists generally expected.

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