USA producer prices increased by the most in more than 1-1/2 years in July, but the overall trend in producer inflation remained subdued amid signs the economy's recovery from the COVID-19 recession was faltering.
The extra 600-U.S. -dollar weekly unemployment benefit for the unemployed, which benefited almost 30 million Americans, expired at the end of July, as Republican and Democratic lawmakers failed to reach a deal over the next COVID-19 relief bill.
Core inflation - which excludes volatile food and energy prices - rose 0.6% in July on the month following a 0.2% increase in June, and 1.6% on the year following 1.2% growth the previous month.
Gasoline prices rose 5.3% from June to July but are down 20.3% in the past 12 months as the coronavirus recession kept many Americans from driving. At the same time, the move in inflation to the Federal Reserve's 2% target will likely be a slow process.
But the budding recovery from the pandemic is showing signs of stress as new coronavirus infections spiral across the United States, forcing authorities in some of the hot spots to either shut down businesses again or pause reopenings.
The economy, which entered recession in February, suffered its biggest blow since the Great Depression in the second quarter, with gross domestic product dropping at its steepest pace in at least 73 years.
Prices for clothing rose 1.1% after a 1.7% jump in June, while used cars rose 2.3%, the most since early 2010. July's core PCE price index data will be released later this month.
Stocks on Wall Street were trading largely higher, with the S&P 500 index closing in on a record high, as investors bet on more stimulus measures. The dollar () fell against a basket of currencies.
Economists have warned that the US economy is at serious risk of sliding back into recession if the White House and Congress could not reach a deal on another fiscal rescue package in the coming months. Wholesale gasoline prices increased 10.1% after advancing 26.3% in June.
Food-at-home prices had been climbing as retail demand grew with restaurants closed for COVID-19 lockdowns. And "higher food prices are obviously unwelcome just now and stretch consumers' limited budgets". Beef prices tumbled 8.2% after surging in recent months. Prices for full service meals increased 0.4%. That followed June's 0.1% gain, which was the smallest rise since July 2013. New vehicles also increased 0.8%, the biggest gain in nine years. The cost of prescription medication, however, fell 0.2%.