The consumer-price index increased 0.3 percent, the most in a year. A gauge excluding volatile food and fuel costs, the so-called core rate, increased 0.1 percent, as projected.
The report showed rents, the biggest component in CPI, increased for a second month, and the cost of clothing, used cars and tobacco climbed, diminishing the risk of a protracted drop in prices that would hurt the economy. Economists say the lack of inflation gives Federal Reserve policy makers scope to leave the benchmark interest rate near zero into 2011 to help invigorate the economy.
A report from the Commerce Department showed sales at U.S. retailers rose less than forecast in July, indicating the lack of jobs is prompting Americans to rein in spending. Purchases increased 0.4 percent, led by autos and gasoline. Excluding auto dealers and service stations, demand dropped 0.1 percent.
In the 12 months ended in July, prices rose 1.2 percent following a 1.1 percent year-over-year gain the prior month. The core rate rose 0.9 percent from July 2009, matching the smallest year-over-year gain since 1966.
Compared with a month earlier, energy costs increased 2.6 percent, and food costs fell 0.1 percent.
Owners-equivalent rent, one of the categories designed to track rental prices, rose 0.1 percent for a second month, the first back-to-back gain in a year.
Apartment landlords are seeing a surge in rentals as mounting foreclosures reduce homeownership. The number of occupied apartments increased by 215,000 in the 64 largest U.S. markets in the first half of the year, according to MPF Research, almost twice the units added in all of 2009 and the most since the firm began tracking the data in 1992. The vacancy rate declined to 6.6 percent in June from 8.2 percent in December.
The CPI is the broadest of three monthly price gauges from Labor, because it includes goods and services. Almost 60 percent of the CPI covers prices consumers pay for services ranging from medical visits to airline fares and movie tickets.
A Labor Department report yesterday showed prices of goods imported into the U.S. rose less than forecast in July. The 0.2 percent increase marked the first gain in three months and followed a 1.3 percent drop in June.