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U.S. consumer Prices unexpectedly declined in July, supporting the Federal Reserve's view that accelerating inflation earlier this year may prove temporary. Industrial production and home construction rose.
"We are seeing positive growth numbers and tame inflation – – that's a pretty good mix,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut.
The consumer price index fell 0.1 percent, led by lower gasoline and clothing costs, after a 0.3 percent increase in June, the Labor Department said in Washington. The core rate, which excludes food and energy, rose 0.1 percent for a second month.
The inflation report suggests companies are keeping a lid on prices to help boost sales and that the Fed may be able to hold to its plan of gradual interest-rate increases, economists said. At the same time, increases in homebuilding and business spending on equipment show the economy may speed up after the weakest quarter for economic growth in more than a year.
Housing starts rose 8.3 percent in July to an annual pace of 1.978 million new units, the Commerce Department said. That exceeded the 1.898 million median forecast in a Bloomberg News survey of economists. Production at factories, mines and utilities increased 0.4 percent, led by a 0.6 percent rise in manufacturing. Business equipment production jumped 1.5 percent.
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