U.S. consumer prices fell slightly in August, the first monthly decline since the spring of 2013, as gasoline, airline fares, and clothing prices fell, the government reported Wednesday, providing further evidence that inflation remains tame.
The Labor Department said its consumer price index (CPI) fell 0.2 percent last month following a 0.1 percent increase in July. It was the first decline in 16 months and came as a broad drop in energy prices offset increases in food and housing costs.
Energy prices fell 2.6 percent in August, the second consecutive monthly drop. Gasoline costs plunged 4.1 percent following a 0.3 percent decline in July. Food prices rose 0.2 percent after gaining 0.4 percent the previous month. Over the past 12 months, food costs have risen 2.7 percent, reflecting a historic drought in California that has reduced crop yields.
Core CPI, which excludes volatile energy and food costs, was unchanged in August, the first time there has not been an increase since October 2010.
Over the past 12 months, overall consumer prices and core prices are both up a modest 1.7 percent, well under the 2-percent annual inflation target set by the Federal Reserve (Fed).
Analysts believe that inflation will remain moderate in coming months, helped by falling energy prices. Gasoline prices are down to an average of $3.38 a gallon (3.8 liters), 8 cents lower than a month ago and 14 cents lower than a year ago.
The recent decline in gasoline prices is one reason economists are optimistic that consumer spending - which accounts for 70 percent of U.S. economic activity - will show solid gains in the coming months. A drop in gasoline prices means consumers will have more money to spend on other items.