Consumer prices down 1.5% in past year

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NEW YORK (CNNMoney.com) -- A key index of consumer prices rose in August, but sank significantly over the past 12 months, the government said Wednesday.

The Consumer Price Index, the Labor Department's key measure of inflation, rose 0.4% in August on a monthly basis. Economists surveyed by Briefing.com expected a 0.3% increase.

Overall CPI has declined 1.5% over the past 12 months.

In the near term, "inflation is not the story," said PNC analyst Robert Dye "We're still focused on making sure we emerge from this recession with reasonable momentum."

The government report attributed the month-to-month increase to the gasoline index, which rose 9.1% in August. That jump accounted for more than 80% of the overall CPI increase.

Despite August's increase, the gasoline index has fallen 30% over the past year. That's due to record-high gas prices in summer 2008, which reached a peak of $4.114 per gallon on July 17.

Core CPI and inflation: The closely watched core CPI, which excludes volatile food and energy prices, rose 0.1% after falling 0.3% in July.

Core CPI increased 1.4% on an annual basis, marking the smallest year-over-year jump since February 2004.

Right now, the majority of the variation is coming from volatile energy prices, noted PNC's Dye.

"For inflation to be a concern, we'd have to see core rates rising consistently above 0.2% each month and wages start to rise," Dye said. "The labor markets are far from healed enough for that to happen."

Sector-by-sector: Prices in most individual sectors increased by less than 1% in August. But the energy index posted a 4.6% jump, and the used cars index rose 1.9%.

The new vehicles index saw the biggest loss, at a 1.3% decline. Commodities excluding food and energy inched down by 0.3%.