With a steep drop in energy prices offset by higher prices for food, medical care, and apparel, the Labor Department released a report on Tuesday showing that overall U.S. consumer prices were unchanged in the month of June.
The Labor Department said its consumer price index came in flat in June following a 0.3 percent drop in May. The flat reading on consumer prices came in line with economist estimates.
Energy prices showed another notable decrease in the month of June, falling by 1.4 percent after plunging by 4.3 percent in the previous month.
The drop in energy prices reflected a 2.0 percent decrease in gasoline prices as well as a 7.9 percent drop in fuel oil prices. On the other hand, natural gas prices rebounded by 1.7 percent.
The report also showed that food prices edged up by 0.2 percent in June after coming in unchanged in May. Prices for food at home crept up by 0.1 percent after edging down by 0.1 percent in the prior month.
Excluding food and energy prices, the core consumer price index rose by 0.2 percent in June. The modest increase matched the core price growth seen in the three previous months and came in line with expectations.
The increase by the core index was largely due to a 0.6 percent increase by the medical care index, which marked the biggest increase since September 2010.
Prices for apparel rose for the fourth consecutive month, climbing by 0.5 percent, while prices for recreation also increased by 0.3 percent.
Meanwhile, the index for airline fares tumbled by 2.5 percent and the index for used cars and trucks was unchanged after a series of increases. The shelter index also showed its smallest increase since September.
Compared to the same month a year ago, overall consumer prices were up by 1.7 percent in June, while core prices were up by 2.2 percent.
Jim O'Sullivan, Chief U.S. Economist at High Frequency Economics, noted that the annual rate of consumer price growth is down sharply from 3.0 percent seen at the end of 2011, while the core rate is identical to the 2.2 percent seen at the end of 2011.
"That pace is consistent with 2% or a little lower for the Fed's preferred PCE price index, or around what is considered ideal by most Fed officials," O'Sullivan said.
He added, "With inflation fairly neutral, the case for more Fed easing will depend primarily on the growth numbers, which have clearly weakened, but probably not enough yet for the Fed chairman to send a 'we are going to ease again at the next meeting' signal in his testimony later this morning."
Last Friday, the Labor Department released a separate report that unexpectedly showed a modest increase in U.S. producer prices in the month of June, with prices rebounding slightly after showing a sharp drop in the previous month.
The report said the producer price index edged up by 0.1 percent in June after tumbling by 1.0 percent in May. The modest increase surprised economists, who had expected prices to see further downside and fall by about 0.4 percent.
Excluding a continued drop in energy prices and an increase in food prices, the core producer index rose by 0.2 percent in June. The increase matched the core price growth seen in each of the three previous months and came in line with economist estimates.
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