Prices rise in June as consumers feel pain at the pump

Luke Sharrett | Bloomberg | Getty Images

U.S. consumer prices rose in June as the cost of gasoline surged, but the overall trend continued to point to a gradual build up of inflationary pressures.

The Labor Department said on Tuesday its Consumer Price Index increased 0.3 percent last month after May's 0.4 percent gain. Gasoline accounted for two-thirds of the rise in prices last month. In the 12 months through June, the CPI increased 2.1 percent after a similar rise in May.

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Inflation is creeping up as the economy's recovery becomes more durable, a welcome development for some Federal Reserve officials who had worried that price pressures were too low.

June CPI up 0.3%
June CPI up 0.3%

The steady increases have led economists to predict that the main inflation gauge watched by the Fed, currently running below the U.S. central bank's 2 percent target, could breach that target by year-end as an acceleration in job growth lifts wages.

Economists polled by Reuters had expected consumer prices to gain 0.3 percent in June and rise 2.1 percent from a year-ago.

Gasoline prices jumped 3.3 percent after increasing 0.7 percent in May.

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Prices for electricity also rose, but slowed from May's 2.3 percent increase.

Santelli: Inflation data not cool
Santelli: Inflation data not cool

Food prices edged up 0.1 percent in June, the smallest rise since January. Food prices have now advanced for six straight months. A drought in California last year has been pushing up prices, but the momentum is ebbing.

Stripping out food and energy prices, the so-called core CPI rose 0.1 percent, slowing after May's 0.3 percent increase.

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In the 12 months through June, the core CPI increased 1.9 percent after rising 2.0 percent rise in May. Economists had forecast the core CPI rising 0.2 percent from May and 2.0 percent from a year-ago.

The core CPI was held back by declines in prices for new motor vehicles and used trucks. The cost of shelter moderated a bit as did airline fares and medical care services, which were flat.

By Reuters