WASHINGTON: Cheap energy prices kept US inflation flat in June in another sign price pressures remain weak in the world’s largest economy, Labor Department figures showed. The falling price of gasoline also helped hold down US retail sales, which contracted for the second straight month in June, the Commerce Department reported separately. Slow inflation has baffled economists given the very low unemployment rate, but the numbers come even as US central bankers continue to say they expect inflation to rebound allowing them to raise the benchmark interest rate gradually. Analysts had expected the Consumer Price Index, which tracks the costs of household goods and services, to remain flat last month after CPI fell 0.1 percent in May.
The less volatile 12-month CPI measure slowed three-tenths from May to 1.6 percent, continuing a sharp a decline since February. However, CPI excluding food and energy, categories which can see big swings, rose 0.1 percent last month, the third straight increase. The annual core inflation rate was 1.7 percent, the same as May but six-tenths slower than January. In the retail sector, Americans in June spent less on restaurants, bars and groceries, while the transition from department stores to online retailers like Amazon continued.
Overall retail sales fell 0.2 percent for the month to $473.5 billion, a surprise to analysts who had forecast an increase of 0.1 percent. Weak auto sales, which have been down in the first half of 2017, were not to blame this time: excluding that volatile category, sales were still down 0.2 percent. Gas stations, however, saw a 1.3 percent drop in sales last month, a time when Americans traditionally hit the road for summer holidays pushing gasoline prices higher. But excluding car sales and gasoline, retail sales still contracted by 0.1 percent. The struggling department store sector fell 0.7 percent while online stores sales rose 0.4 percent. For the April-June period, sales were up 3.8 percent over the same quarter of 2016.