Inflation Low, Consumer Prices Flat, Retail Sales Up
Last month, consumer prices were flat, while retail sales grew more than expected. Energy prices fell shortly, which may have added to consumers’ desire to spend.
The Labor Department reported that the consumer price index did not change from that of May after that month’s decrease of 0.1%. Retail purchases rose 1.7% in June.
“You have the perfect economic picture here – strong spending with low inflation,” said Dresdner Kleinwort Wasserstein economist Elisabeth Denison.
Inflation is expected to rise for this month as gasoline reaches higher prices, whereas last month there was a point when energy prices dropped as much as 0.5%. Nell Henderson of the Washington Post writes:
With no inflation to offset pay gains, real average weekly earnings for most U.S. workers rose 0.2 percent last month from their level in May, the department said in another report. They were up 0.4 percent in the 12 months that ended in June, the first yearly gain since September.
Deep discounting by automakers, clothing stores and other retailers helped lure consumers to spend that extra cash. Retail sales climbed 1.7 percent last month after falling 0.3 percent in May, according to the Commerce Department.
“These reports are pretty profound,” said JPMorgan economist James Glassman. “This is the third straight month that the inflation numbers have been more benign than you’d think, despite the surge in energy prices.”
Prices of U.S. stocks went up after the Labor Department’s report. Some speculate that this is because the lower inflation decreases the pressure on the Federal Reserve to raise interest rates more.