Other data on Tuesday showed industrial production pushed higher in June as manufacturing output found some momentum, raising hope a recent slowdown in factory activity was either over or close to running its course.
The Labor Department said its Consumer Price Index increased 0.5 percent, the largest rise since February, after nudging up 0.1 percent in May. Gasoline prices accounted for about two thirds of the increase in the CPI.
Economists polled by Reuters had expected consumer inflation to increase 0.3 percent last month.
In the 12 months through June, consumer prices advanced 1.8 percent after rising 1.4 percent in May. It was also the largest increase since February.
Stripping out volatile energy and food, consumer prices increased 0.2 percent for a second straight month. That took the increase over the 12 months to June to 1.6 percent, the smallest increase since June 2011. The so-called core CPI had increased 1.7 percent in May.
While both inflation measures remain below the Federal Reserve's 2 percent target, details of the report suggested the recent disinflation trend was fading, with medical care costs rising. Prices for new motor vehicles, apparel and household furnishings also increased.
Fed Chairman Ben Bernanke, who last month said the central bank would start cutting back the $85 billion in bonds it is purchasing each month to keep borrowing costs low, has viewed the low inflation as temporary and expects prices to push higher.
Alan Ruskin, an analyst at Deutsche Bank in New York, said the report should "counter arguments that there is a material deflation risk."
In a separate report, the Fed said output at the nation's factories, mines and utilities rose 0.3 percent last month after a flat reading in May. The increase reflected a 0.3 percent rise in manufacturing output.
Economists said it suggested some pickup in economic activity at the end of the second-quarter.
"If manufacturing growth is on the verge of accelerating into the second half of the year, this, along with solid gains in housing, should support growth in the second half of 2013," said John Ryding, chief economist at RDQ Economics in New York.
Prices creeping up
Tepid economic growth has been keeping a lid on inflation pressures. While some pockets of pricing power are starting to gradually emerge, there is no consensus on whether this trend will hold, given still-high unemployment.
Last month, gasoline prices soared 6.3 percent after being flat in May. June's increase in the cost of gasoline was the largest since February. When unadjusted for seasonal fluctuations, gasoline prices rose only 0.6 percent.
Food prices increased 0.2 percent after slipping 0.1 percent the prior month.
Overall housing costs maintained their steady rise, with owners' equivalent rent - which accounts for about a third of the core CPI - increasing 0.2 percent after a similar gain in May.
Medical care services rose 0.4 percent after being flat in May, while medical care commodities rebounded 0.5 percent as the cost of prescription drugs increased. Medical care commodities had dropped 0.5 percent the previous month.
Weak medical care costs have been the one of the key contributors to the low inflation rate.
Economists cite a host of reasons for the downward pressure on health costs, ranging from the expiration of patents on a number of popular prescription drugs to government spending cuts that are reducing payments to doctors and hospitals for Medicare.
"It's unclear we have seen all the medical care softness or we might see softness later this year from the effect of sequester," said Laura Rosner, an economist at BNP Paribas in New York.
Apparel prices pushed up 0.9 percent, the largest increase since August 2011, after edging up 0.2 percent in May.
New motor vehicle prices increased 0.3 percent. They had been flat in May. Prices for used cars and trucks fell for a second straight month. — Reuters
source: gmanetwork.com
