US inflation flat in June while retail sales sink

WASHINGTON • Cheap energy prices kept inflation in the United States flat last month in another sign that price pressures remain weak in the world's largest economy, Labour Department figures showed yesterday.

The Commerce Department reported separately that the falling price of petrol also helped to hold down US retail sales, which contracted for the second straight month in June.

Slow inflation has baffled economists, given the very low unemployment rate, but the numbers come even as US central bankers continue to say they expect inflation to rebound, allowing them to raise the benchmark interest rate gradually.

Analysts had expected the Consumer Price Index (CPI), which tracks the costs of household goods and services, to remain flat last month after it fell 0.1 per cent in May. The less volatile 12-month CPI measure slowed three-tenths from May to 1.6 per cent, continuing a sharp decline since February.

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However, CPI excluding food and energy, categories which can see big swings, rose 0.1 per cent last month, the third straight increase.

The annual core inflation rate was 1.7 per cent, the same as May but six-tenths slower than in January.

In the retail sector, Americans last month spent less on restaurants, bars and groceries, while the transition from department stores to online retailers continued. Overall retail sales fell 0.2 per cent for the month to US$473.5 billion (S$651.7 billion), a surprise to analysts who had forecast a 0.1 per cent rise.

Slow inflation has baffled economists, given the very low unemployment rate, but the numbers come even as US central bankers continue to say they expect inflation to rebound, allowing them to raise the benchmark interest rate gradually.

Weak car sales, which have been down in the first half of the year, were not to blame this time: excluding that volatile category, sales were still down 0.2 per cent. Petrol stations, however, saw a 1.3 per cent drop in sales last month, a time when Americans traditionally hit the road for summer holidays, pushing petrol prices higher.

But excluding car sales and patrol, retail sales still contracted by 0.1 per cent. The struggling department store sector fell 0.7 per cent while online stores sales rose 0.4 per cent. For the April-June period, sales were up 3.8 per cent over the same quarter last year.

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A version of this article appeared in the print edition of The Straits Times on July 15, 2017, with the headline 'US inflation flat in June while retail sales sink'. Print Edition | Subscribe