The steepest decline in gasoline prices in more than four years helped keep inflation in check last month, while sluggish retail sales suggested consumers are showing caution.
The Labor Department said Friday that consumer prices rose a tame 0.2 percent in July, compared to 0.1 percent the previous month. For the year so far, the Consumer Price Index is advancing at a 3.1 percent annual rate that is not much worse than the 2.7 percent increase for all of last year.
The government also reported that retail sales, after two strong months, fell 0.1 percent in July. While air conditioner sales to cope with the heat wave provided a boost, a 1.7 percent drop in car buying led the downturn.
“Consumers remain constrained by sluggish income growth, high debt and low savings,” said Bruce Steinberg of Merrill Lynch & Co. “Inflation is simply not a problem.”
Many analysts expect the economy to pick up as the year progresses after growth came to a virtual halt in the second quarter, which ended June 30.
Led by higher prices for beef and veal, food prices rose 0.2 percent in July, compared to 0.1 percent the previous two months. Tomatoes soared 12.6 percent, the largest increase in three months. But the price of lettuce plummeted 19.9 percent, after diving 38.8 percent in June.