U.S. July consumer price index data was worse than expected as a large number of items surged in price, but falling energy prices and the composition of CPI suggest prices might moderate ahead.

Overall July CPI printed up 0.8% in a second large monthly gain, and the core was 0.3% higher — for a 5.6% rise overall and a 2.5% increase in the core over-the-year. Core now matches its high January over-the-year pace, but January’s price gains did not hold.

Core was boosted by new cars at up 0.2%, apparel up 1.2% — mainly in women’s and shoes — airfares 1.3% higher, tobacco rose 1.2%, books gained 0.8%, and tuition rose 0.4%. Owners’ equivalent rent was up 0.1%, and rents advanced 0.3%. Medical commodities — a new category that now includes drugs — posted down 0.2%.

Food printed up 0.9% on gains in all areas. The cost of food at home rose 1.2%.

Energy was up 4.0% even though fuel oil fell 0.2%. With gasoline prices falling this area should ease ahead.

— Market News International

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