WASHINGTON -- The cost of living in the U.S. rose in July for a third month, supporting the Federal Reserve’s forecast that inflation will move closer to its target.
The consumer-price index increased 0.2 percent after a 0.5 percent gain in June, Labor Department figures showed Thursday in Washington. The advance matched the median forecast of 82 economists surveyed by Bloomberg. The core measure, which excludes food and fuel, also climbed 0.2 percent from June.
Fed policy makers have said they will watch inflation figures closely to ensure the U.S. doesn’t slip into a prolonged period of diminishing increases, or disinflation, that would damage the recovery. Macy’s Inc. is among companies having trouble boosting prices as the world’s largest economy struggles to accelerate following a slowdown that began in late 2012.
Pricing power is “very limited,” Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Ala., said before the report. “I think the point within the Fed is that it’s not falling any further -- it at least has stabilized.”
Economists’ estimates in the Bloomberg survey ranged from a drop of 0.1 percent to a gain of 0.5 percent.
Another Labor Department report Thursday showed claims for jobless benefits unexpectedly dropped last week to the lowest level in almost six years, signaling the job market continues to mend. The number of applications for unemployment insurance payments declined by 15,000 to 320,000 in the week ended Aug. 10, the fewest since October 2007. The median forecast of 44 economists surveyed by Bloomberg called for 335,000.
The increase in consumer prices last month was led by rising costs for clothing, medical care, tobacco and new automobiles. Declines in household furnishings, airline fares and used cars and trucks limited the advance.
The core gauge advanced 0.2 percent for a third consecutive month, and matched the median forecast of economists surveyed.
Overall consumer prices increased 2 percent in the 12 months ended in July after a 1.8 percent year-over-year gain the prior month.
The core CPI rose 1.7 percent from July 2012, following a 1.6 percent advance in the prior 12-month period that was the smallest since June 2011.
Energy costs increased 0.2 percent from a month earlier, while food costs climbed 0.1 percent.
Even with inflation under control, paychecks are failing to keep pace. Hourly earnings adjusted for inflation dropped 0.2 percent in July, and were down 0.1 percent over the past 12 months, separate figures from the Labor Department showed Thursday.
The consumer-price index for the Northeast region, which includes the six New England states as well as New Jersey and New York, increased 1.8 percent year over year in July.
Macy’s, the second-largest U.S. department-store chain, yesterday posted fiscal second-quarter profit that trailed analysts’ estimates and cut its forecast for earnings this year after sales unexpectedly dropped.
Chief Executive Officer Terry Lundgren used promotions to clear inventory that had built up as a cool spring depressed purchases of summer clothing and uneven economic growth restrained consumers’ spending.
“Our performance in the period, in part, reflects consumers’ continuing uncertainty about spending on discretionary items in the current economic environment,” Lundgren said in a statement.
Fed policy makers have warned of the risks of prolonged inflation below their 2-percent target, while economists project the central bank will start reducing its $85 billion in monthly asset purchases in September as the economy shows improvement.
Fed Chairman Ben S. Bernanke has said low inflation could cause the recovery to bog down by inhibiting capital investment and increasing the risk of “outright deflation,” a broad-based decline in prices. “Very low inflation poses risks to economic performance,” he told lawmakers July 17. “We will monitor this situation closely.”
The CPI is the broadest of three price gauges from the Labor Department because it includes goods and services. About 60 percent of the index covers prices consumers pay for services from medical visits to airline fares, movie tickets and rents.
Wholesale prices unexpectedly were little changed in July after two straight increases, Labor Department data showed yesterday. Import prices rose less than forecast in July, reflecting the biggest drop in automobile import prices in more than 20 years, according to a report released earlier this week.