Consumer prices rise on higher energy costs

NEW YORK (CNNMoney.com) -- A key index of consumer prices rose in July from a year earlier amid higher energy costs, the government said Friday. Prices also increased on a monthly basis for the first time in four months.

The Consumer Price Index, a key measure of inflation, rose 1.2% over the past 12 months, driven by a 5.2% spike in energy costs due to higher gasoline prices. In June, overall prices edged up 1.1% from the previous year.

The so-called core CPI, which is closely watched by economists because it strips out volatile food and energy prices, rose 0.9% over the past year.

"Core inflation remains pretty low," said Paul Ashworth, a senior economist at Capital Economics. "But the near-term risks of it plunging all the way to zero or below have certainly receded."

The Federal Reserve hold its outlook for inflation to remain "subdued for some time."

July: For the month, overall prices were up 0.3% last in July, the first increase since March. Economists surveyed by Briefing.com were expecting prices to rise 0.2%. Prices fell 0.1% in June.

Energy prices rose for the first time since January, as commodity and gasoline prices hiked more than 4% during the month. Food prices, however, declined 0.1% as the cost of fruits and vegetables decreased.

"Gasoline prices rebounded by 4.6% month-over-month, reversing a similar-sized decline in June." said Ashworth.

In contrast to modest changes in food prices over recent months, Ashworth said he expects robust increases in food costs in the fall given the recent surge in agricultural commodity prices, including wheat.

The so-called core CPI, which is closely watched by economists because it strips out volatile food and energy prices, edged up 0.1% for the month, in line with economists' forecast and down from the 0.2% increase in July.

Costs for housing, clothing, cars and tobacco continued to rise during the month while prices for medical care, airline fares and household furniture slipped.