Consumer Prices Up 0.3 Percent in August

Consumer prices rose by 0.3 percent in August, the largest increase in five months, reflecting in part a jump in the cost of gasoline that pinched motorists’ pockets.

The latest reading on the Consumer Price Index, the government’s most closely watched inflation barometer, came after increases of 0.2 percent in June and July, the Labor Department reported Tuesday. August’s performance matched economists’ expectations.

Excluding energy and food prices, which tend to swing widely from month to month, “core” consumer prices nudged up by just 0.1 percent in August, down from a 0.2 percent increase the previous month. The showing on the core inflation rate suggested that most other prices are moderate and marked a slightly smaller increase than the 0.2 percent rise that economists were forecasting.

Even with recent increases in the CPI, Fed policy-makers have expressed more concern about inflation going down, rather than up.

Economists have said that the current climate of generally low levels of inflation allows policy-makers with the Federal Reserve Board, who were meeting Tuesday, the leeway to keep a key short-term interest rate at a 45-year low of 1 percent.

At previous Fed meetings and in speeches, Fed Chairman Alan Greenspan and his colleagues have talked about the importance of being on guard against the remote threat of deflation, an economically dangerous and widespread price decline, because of its potential to wreck the economy.

But with the economy showing signs of gaining traction, deflation fears should ease, some economists said.

For the 12 months ending August, consumer prices rose 2.2 percent, compared with a 2.4 percent increase for all of last year. Core prices, excluding energy and food costs, meanwhile, went up by just 1.3 percent, the smallest increase since 1966, and down from a 1.9 percent advance for all of 2002.

The weakness in core prices is a byproduct of a lackluster economic climate seen earlier this year that has made it difficult for some companies to raise prices. That’s a benefit for consumers, but can squeeze producers’ profits margins.

Computer prices fell by 2.9 percent in August. Airline fares dropped by 1.6 percent and costs for lodging prices dipped by 0.3 percent.

But those and other price decreases were swamped by rising energy prices last month.

Energy prices jumped 2.7 percent in August, up from a 0.4 percent rise the previous month. Most of August’s increase in energy prices came from gasoline, whose prices soared by 6.2 percent. Gasoline prices skyrocketed after the mid August blackout, but more recently have shown signs of stabilizing.

Food prices, meanwhile, increased 0.3 percent in August, up from a tiny 0.1 percent rise. Rising prices for dairy products and beef and veal outweighed falling prices for fruits and pork.

Educational costs continued to put a strain on consumers’ wallets. Prices for college tuition and fees rose 2.5 percent iin August, the biggest increase since September 1991.