WASHINGTON (AP) – Consumer prices shot up in July at twice the expected rate, pushed higher by surging energy and food costs. The latest surge left inflation running at the fastest pace in 17 years.
The Labor Department reported Thursday that consumer prices rose by 0.8 percent last month, twice the 0.4 percent gain that economists had been expecting.
It marked the third straight month of oversized inflation increases following jumps of 0.6 percent in May and 1.1 percent in June and left inflation rising by 5.6 percent over the past year, the biggest 12-month gain since January 1991.
That inflation surge presents a major problem for the Federal Reserve, which could be forced to start raising interest rates even as the economy struggles to avoid a recession.
The big rise in inflation left consumers even more squeezed. The Labor Department said that average weekly earnings, after adjusting for inflation, fell by 3.1 percent in July compared to a year ago, the biggest year-over-year decline since November 1990.
Meanwhile, the number of newly laid-off workers filing applications for unemployment benefits fell less than expected last week, indicating continued stress in labor markets from the weak economy.
The Labor Department reported Thursday that applications for jobless benefits dropped to 450,000, down by 10,000 from the previous week. However, that was a smaller decline than had been expected and left the four-week average for claims at the highest level in six years.
The big jump in the four-week average for claims was attributed to a number of factors, including a surge in layoffs and increased publicity boosting applications as laid-off workers reapply for extended benefits recently passed by Congress.
Aug 14, 2008