Consumer prices spurted unexpectedly last month, the Labor Department reported Tuesday, in a sign that inflation may be down but not out.
The surprise 0.3 percent rise in the consumer price index in August was led by increases for fruit, cars and clothing, offseting a record drop in tobacco costs and a decline in energy prices.
“The basic message is that inflation lives,” said Robert Dederick, chief economist for Northern Trust Co. of Chicago.
The advance in prices followed three months of extremely mild inflation. Prices rose just 0.1 percent in May and July and were unchanged in June. For the first eight months, inflation was running at a 2.9 percent annual rate, the same as the increase in prices for all of last year.
“We’ve got a three-three economy-3 percent growth and 3 percent inflation,” Dederick said.
The Commerce Department said Tuesday that retail sales posted their fifth straight monthly rise in August as sales of new cars and building supplies increased.
Last month’s modest 0.2 percent sales gain followed a revised 0.3 percent rise in business in July and indicated a slow but steady pickup in economic activity.
After a spurt of price rises early this year, economists became concerned that inflation was set to accelerate. Now most believe the economy is too weak to support an acceleration. That has supported drops in long-term interest rates. But they rose Tuesday as bond prices fell in credit markets on the inflation news.
In August, energy prices fell 0.5 percent, marking the fourth month without an increase. Gasoline prices were down 1.7 percent and fuel oil, 1 percent. That more than offset a 1.4 percent increase in natural gas prices and a 0.3 percent rise in electricity.
Food prices rose 0.3 percent, led by a 4.9 percent jump in fresh fruit prices, the worst in a year. Poultry prices rose 1.1 percent.
Excluding food and energy, prices rose 0.3 percent despite a 2.9 percent drop in tobacco, the steepest since 1935. Medical care costs were up 0.2 percent, the mildest increase since 1984. But clothing costs increased 0.9 percent, the first since February. The department attributed the rise to the early introduction of higher-priced fall and winter clothes, particularly for women.
