September 15, 2011 / 12:41 PM / 6 years ago

August inflation cools on smaller gasoline price increase

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WASHINGTON (Reuters) - The inflation rate decelerated slightly in August as gasoline prices rose at a more modest pace and the cost of buying a new car held flat, the Labor Department said on Thursday.

The Labor Department said its Consumer Price Index increased 0.4 percent last month, after rising 0.5 percent in July.

The reading was higher than analysts' forecasts of a 0.2 percent rise, with food prices posting their biggest gain since March.

Gasoline prices climbed 1.9 percent after jumping 4.7 percent the prior month. Food prices rose 0.5 percent after increasing 0.4 percent in July.

Core CPI - which excludes food and energy -- rose 0.2 percent after rising at the same rate in July. Last month's gain was in line with economists' expectations.

Given limited pricing power for producers as consumers grapple with a 9.1 percent unemployment rate, inflation is not regarded as a threat now for an economy which barely grew in the first half of the year.

The core index was held back by new auto costs, which were unchanged for the second straight month. New car prices had risen relatively sharply in May following a March earthquake disaster in Japan that disrupted global supply chains.

In the 12 months through August, core CPI increased 2.0 percent -- the biggest rise since November 2008. This measure has rebounded from a record low of 0.6 percent in October 2010.

Overall consumer prices rose 3.8 percent year-on-year, the most since September 2008.

Reporting by Jason Lange, Editing by Andrea Ricci

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