July CPI: Consumer-level prices up 3.2%, but well below year-ago levels

Aug. 10 (UPI) -- Consumer-level prices in the U.S. economy ticked up for the first time in more than a year, though core inflation showed a modest contraction, the government said Thursday.

U.S. consumer inflation increased, with the cost for a place to live the largest contributor, the government reported Thursday. The Consumer Price Index was up 3.2% on an annual basis. Inflation rose to 3% during the prior month, making July the first month for an increase in 13 months.

"The index for shelter was by far the largest contributor to the monthly all items increase, accounting for over 90% of the increase, with the index for motor vehicle insurance also contributing," the Bureau of Labor Statistics reported.

BLS data show the cost for shelter increased 0.4% month on month and by 7.7% on an annual basis to July. The next closest gains were the 9% increase for "transportation services" and 7.1% annually in the cost of going out to eat.

So-called core inflation, which strips out volatile food and energy prices, showed a 0.2% month-on-month gain to July and 4.7% on an annual basis, down slightly from the prior month. Even still, prices are nearly half as less as they were a year ago.

"Today's report shows that our economy remains strong," President Joe Biden said. "Annual inflation has fallen by around two-thirds since last summer, and inflation outside of food and energy has fallen to its lowest level in any three-month period since September 2021."

The Federal Reserve is working to combat inflation through aggressive rate hikes, raising its rate by 25 basis points last month. U.S. Federal Reserve Gov. Michelle Bowman said Monday that progress has been made in the fight against inflation, but rates remain above the 2% target and may warrant additional action.

"Of course, monetary policy is not on a pre-set path, and I will be closely monitoring the incoming data and their implications for the economic outlook," she said.

Markets at the start of the trading day on Wall Street were largely upbeat, however, with the Dow up 324 points, or 0.9%, at the opening bell.

"Unfortunately we are likely to see headline annual inflation rise further in year-on-year terms in August, albeit modestly," said James Knightly, the chief international economist at investment bank ING. "This will largely reflect higher energy costs, but we suspect it will resume its downward path again by October."