WASHINGTON (AP) — Higher gas and housing costs boosted U.S. consumer prices 0.4 percent in August, the most in seven months. The increase suggests inflation could be picking up, but the figures were likely distorted by Hurricane Harvey.
Consumer prices climbed 1.9 percent last month compared with a year earlier, the Labor Department said Thursday, up from an annual gain of 1.7 percent in August and the second straight increase. Excluding volatile energy and food costs, prices rose 0.2 percent in August and 1.7 percent from a year earlier.
The pickup will likely assuage Federal Reserve policy makers that prices are stabilizing, a sign of a healthy economy. Fed officials may be more likely to raise short-term interest rates as a result in the coming months, economists said.
"August's strong gain should help alleviate concerns among Fed members that the slowdown in inflation that began in the spring is set to continue," said Sarah House, an economist at Wells Fargo.
The government said Harvey had a "very small effect" on its ability to gather data. But it would not say whether last month's gas price increase resulted from the storm. Harvey disrupted oil refineries on the Gulf Coast and pushed up average gas prices nationwide, though the increase occurred at the end of the month. The government collects price data throughout the month.
Gas prices jumped 6.3 percent last month, the largest increase since January. Housing costs were the other main driver of inflation last month: Hotel prices leapt 4.4 percent, the largest gain on records dating from 1997, after falling by the most on record in July. Rents rose 0.4 percent, the most in nearly a year.
Most of the Gulf Coast refineries are now operational, which could bring gas prices back down in the coming weeks. Average prices have actually slipped two cents a gallon, to $2.65, in the past week.
Even with last month's increase, inflation remains below the Federal Reserve's 2 percent target, where it has been for five years. That has complicated the Fed's plans to lift short-term interest rates one more time this year.
Most troublesome for the Fed was that consumer price inflation slowed this year through June. Prices rose 2.7 percent in February from a year earlier, but the annual rate then fell to 1.6 percent in June. Fed chair Janet Yellen attributed the drop to temporary factors, including sharp falls in the price of mobile phone services.
An alternative inflation gauge preferred by the Fed slipped even lower, to 1.4 percent in July.
The Fed typically raises its benchmark interest rate to ward off inflation. A rate increase is harder to justify when price increases are slowing. Many analysts previously expected the Fed's next increase would occur in December, but that could slip to next year.
At the Fed's meeting next week, economists expect policymakers will take steps to shrink its bloated balance sheet, which holds more than $4 trillion of government securities it purchased to hold down longer-term interest rates in the aftermath of the recession.
The cost of clothing, auto insurance, and health care rose last month. Boys' clothing prices jumped 9.6 percent, the biggest monthly gain on record.
But airplane fares, used cars and the cost of mobile phone services all fell.