US consumer prices rose in August by the most in three years as the cost of petrol jumped.
But there was little sign of a pick-up in underlying inflation pressures, which should allow the Federal Reserve to stay on its ultra-easy policy path.
The consumer price index increased 0.6% last month after being flat in July, the Labor Department said.
That was the first increase in five months and was slightly above economist's expectations for a 0.5% rise.
Petrol (gasoline) prices, which recorded their largest increase since June 2009, accounted for about 80% of the rise in consumer inflation last month.
However, underlying inflation was fairly muted. The core CPI, which excludes food and energy prices, increased 0.1% for a second month in a row.
In the 12 months to August overall consumer prices increased 1.7%, staying below the Fed's 2% target, but advancing from July's 1.4% rise.
The US Federal Reserve last night launched a third round of bond purchases and extended its pledge to hold interest rates near zero to at least until the middle of 2015 from late 2014, in an effort to tackle stubbornly high unemployment.
Federal Reserve Chairman Ben Bernanke said he believed inflation would remain close to the Fed's target, noting that longer-term inflation expectations were quite stable.
Last month, overall inflation was boosted by a 9% surge in petrol prices after a 0.3% rise in July. Petrol prices at the pump increased 28 cents in August and could squeeze household budgets.
Food prices rose 0.2% last month after edging up 0.1% the previous month. Prices are expected to rise significantly later this year as the impact of a severe drought, which has caused a spike in corn and soybean prices, works its way through to the supermarket.
The cost of clothing declined 0.5%, breaking five months of gains. New motor vehicle prices gained 0.2% after falling 0.1% in July. Prices for used cars and trucks fell 0.9% after dropping 0.5% the previous month. Housing costs edged up, with owners' equivalent rent rising 0.3%, the largest rise since November 2008.
Petrol and cars boost US retail sales
US retail sales rose for a second month in a row in August, boosted by cars and high petrol prices, but the underlying tone pointed to modest economic growth in the third quarter.
Retail sales increased 0.9%, the largest increase since February, the Commerce Department said today, after a downwardly revised 0.6% rise in July that was previously reported as a 0.8% advance.
While the gain last month was above economists' expectations for a 0.7% rise, details of the report pointed to an only modest increase in consumer spending this quarter after sluggish demand restricted the economy to a 1.7% annual growth pace in the second quarter.
The rise in sales last month was led by petrol stations, reflecting a 28 cents per gallon increase in the pump price. Petrol sales surged 5.5%, the largest increase since November 2009, after rising 0.4% in July. Car sales increased 1.3%, the most since February, after gaining 0.1% in July.
Excluding petrol and cars, retail sales edged up 0.1% after rising 0.8% the prior month. Receipts at building materials and garden equipment suppliers rose 1% after increasing 1.2% in July.
There were gains in furniture sales and sales at restaurants and bars. But there were declines in sales at clothing stores and at electronics and appliances shops. Receipts at sporting goods, hobby, book and music stores were flat.
Core retail sales, which exclude cars, petrol and building materials, dipped 0.1% after increasing 0.8% in July. Core sales correspond most closely with the consumer spending component of the government's gross domestic product report.
