U.S. consumer prices rebounded in August, a sign of economic health that could nudge the Federal Reserve closer to raising short-term interest rates.
The consumer-price index, measuring what Americans pay for everything from medicine to home rent, grew 0.4% in August from a month earlier, the biggest jump since January, the Labor Department said Thursday.
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Much of the gain was due to a sharp rise in gasoline prices after Hurricane Harvey, which shut Texas refineries, that will likely prove temporary. But prices for other items -- particularly housing -- also rose. Excluding food and energy, so-called core prices grew 0.2%, the most since February.
The report offered the last major snapshot of inflation before Fed policy makers meet next week. Inflation has been unexpectedly weak for most of this year, raising concerns about the economy's underlying health and giving Fed officials pause. Thursday's report bolsters the Fed's view that the weakness was temporary and that inflation will slowly head back toward the central bank's 2% annual target.
"This is the first evidence that the unexpected slump earlier this year is just transitory," Paul Ashworth, economist at Capital Economics, said in a note to clients. "As the impact of the one-off price declines drop out of the annual calculation, core inflation will rebound early next year."
Fed officials have indicated they will raise rates in December if they are confident inflation will rise toward their 2% annual target -- as measured by a separate, Commerce Department index -- and the labor market remains strong.
Thursday's report showed inflation remains weaker than it started earlier in the year. Overall prices rose 1.9% in the 12 months through August, up from July's rate of 1.7% but below January's pace of 2.5%. Core prices climbed 1.7% in the year through August, where it has stayed through summer.
Energy prices rose 2.8% in August from a month earlier, driven by higher gasoline prices. Food prices gained 0.1%. Shelter prices, a measure of rent and mortgage payments, increased 0.5% over the month.
Meanwhile, Americans' incomes dropped last month, the Labor Department said in a separate report. Average weekly earnings, after inflation, fell 0.6% from a month earlier. While hourly earnings rose, higher inflation more than offset the gain, and the average workweek fell.
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(END) Dow Jones Newswires
September 14, 2017 10:59 ET (14:59 GMT)