The gain in the consumer price index was larger than forecast and followed no change in July, the Labor Department said. Excluding food and energy costs, the so-called core index increased 0.1 percent, matching expectations.
Companies such as Kroger Co. are keeping a lid on prices to revive demand as the economy starts to emerge from the worst recession since the 1930s. A lack of inflation will probably give Fed policy makers leeway to keep interest rates near zero in the foreseeable future to secure a recovery.
Compared with a year earlier, prices were down 1.5 percent. For the core index, prices were up 1.4 percent from a year earlier, the smallest gain since February 2004.
The increase in the cost of living reflected a 4.6 percent increase in energy prices in August. Gasoline climbed 9.1 percent.
Gasoline prices this month are in line with August figures, according to AAA. Regular pump prices averaged $2.58 a gallon in the first 15 days of September, compared with an average of $2.62 in August.
Food prices, which account for about a seventh of the CPI, increased 0.1 percent in August, the smallest gain since January.
Lower food prices are dragging down revenue at some businesses. Kroger, the largest U.S. supermarket chain, yesterday reported second-quarter profit that fell more than analysts’ estimates as prices for some products, particularly produce and dairy, decreased more than expected.
The increase in the core index reflected gains in used cars, air fares and hotel rates.
Rents, which make up almost 40 percent of the core CPI, were little changed. Owners-equivalent rent, one of the categories used to track rental prices, climbed 0.1 percent following no change in July.
New vehicle prices plunged 1.3 percent, the biggest drop since 1972. The Labor Department said it considered the administration’s cash-for-clunkers” initiative as a discount off purchase prices, contributing to the drop. The program gave buyers as much as $4,500 for trading in older models for new, more fuel-efficient autos.
The CPI is the broadest of the three monthly price gauges from Labor because it includes goods and services. Labor said last week that prices of goods imported into the U.S. rose 2 percent in August on higher petroleum costs.
A report from the Labor Department yesterday showed prices paid to factories, farmers and other producers rose 1.7 percent in August, more than twice as much as forecast, led by gasoline costs.
Almost 60 percent of the CPI covers prices consumers pay for services ranging from medical visits to airline fares and movie tickets.