Official figures show that US consumer prices rose more quickly than expected in August from July due to a jump in petrol costs. But the Labor Department figures showed that the underlying trend pointed to muted inflation pressures.
The department said its Consumer Price Index rose 0.4% last month after having been flat in July, a touch above market expectations for a 0.3% gain. Petrol prices surged 9.1% after falling 0.8% in July.
Compared with the same period last year, consumer prices declined 1.5%. Prices have been falling on an annual basis since March this year.
Stripping out volatile energy and food prices, the closely watched core measure of consumer inflation rose 0.1% in August after rising 0.1% in July. This came as prices for new vehicles fell 1.3%, the largest decline since October 1972, reflecting government-sponsored incentives that gave discounts to consumers to trade in their old cars for new, fuel-efficient ones.
A separate report from the Federal Reserve showed there was still a great deal of slack in the US economy, which also supported the belief that inflation posed no near-term threat. That is likely to encourage the Fed to keep its main interest rate near zero for a long time to make certain the emerging recovery is sustainable.
The Fed said the capacity utilisation rate, a measure of slack in the economy, inched up to 69.6% but remained well below the 1972-to-2008 average of 80.9%. Overall industrial production rose 0.8% in August, a touch stronger than the 0.6% advance economists had expected. Part of the increase reflected a ramp-up in car making.
US deficit narrowed in Q2
Other figures from the Commerce Department showed that the US current account deficit narrowed 5.5% in the second quarter to its lowest level in more than seven years amid the global economic crisis.
The department said the current account gap stood at $98.8 billion in the April-June period, the smallest deficit since the fourth quarter of 2001 and representing 2.8$ of US economic output.
The overall decrease in the current account deficit was led by a sharp drop in the trade deficit on goods, reflecting weak demand in the recession-hit economy, and a smaller increase in the surplus on services.
