Inflation Almost Non-Existent in June

WASHINGTON – U.S. inflation was almost nonexistent in June, as price softness could be seen in everything from clothing and new cars to housing, a Labor Department report showed Friday.

The Consumer Price Index, the main U.S. inflation gauge, increased a mere 0.1 percent last month after showing no change at all in May. Stripping out volatile food and energy prices, the "core" CPI also inched up 0.1 percent after a 0.2 percent rise in the prior month.

The figures came below the 0.2 percent increases Wall Street had forecast for both the full CPI and the core. The report will give the Federal Reserve added leeway to keep interest rates at their current 40-year low.

"CPI was a good number. We continue to see weakness in apparel prices, a dominant area of core inflation. We also see ongoing strength in the education and medical components," said Gary Thayer, chief economist at A.G. Edwards & Sons, Inc. in St. Louis.

In a separate report that brought positive news for the economy and workers, Labor said real, or inflation-adjusted, earnings increased by 0.6 percent in June after a 0.2 percent gain in May that was downwardly revised from the previously reported 0.3 percent increase.

Meanwhile, in news that hurt the U.S. dollar, the Commerce Department said the U.S. trade deficit set a record in May for the second straight month, as strong American demand for imported automobiles, food and consumer goods swelled the gap to $37.64 billion.

U.S. central bank officials hope that the very low level of overnight interest rates, which Fed Chairman Alan Greenspan described earlier this week as "accommodative," will help add juice to a U.S. economy which is being pressured by a furious sell-off in stock prices that is hurting business and consumer confidence.

Within the CPI report, food and beverage costs crept up 0.1 percent. Energy costs were flat as falling prices for natural gas helped to offset a 0.4 percent rise in gasoline prices.

Housing prices gained 0.1 percent, the cost of clothing sank 0.9 percent and new-car prices eased 0.1 percent. Even the cost of medical care, one of the CPI categories that has tended to show strength lately, was up only a mild 0.2 percent in June.

In the 12 months ended in June, the CPI was up 1.1 percent overall and the core rate was up 2.3 percent.

The CPI report showed no sign the falling dollar was nudging retail prices higher -- something that economists have said seems to be an unlikely prospect amid the environment of weak demand but have been keeping an eye on anyway.