CPI up 5.6% in the past year, biggest increase in 17 years

More lousy news today as the Labor Department released figures stating the CPI grew 0.8% in July alone. Tenants with CPI escalations are definitely going to feel this at renewal time, possibly driving more to default or raise prices to their customers.

The only real saving grace here might be that commodity prices have come down noticeably in August. Either way, it hurts.

WASHINGTON (MarketWatch) -- U.S. consumer prices jumped a greater-than-expected 0.8% in July, marked by big increases in energy, food, clothing and cigarettes, the Labor Department reported Thursday.

The core consumer price index, which measures retail-level inflation after excluding volatile food and energy inputs, rose 0.3% for the second straight month. Read the full report.

Coming in much worse than anticipated, the pair of red-hot inflation readings seem certain to swell the chorus of critics urging the Federal Reserve to raise interest rates to quell inflation.

Economists had predicted that the seasonally adjusted CPI would rise 0.5% and that the core CPI would increase 0.2%, according to a survey by MarketWatch. See Economic Calendar.

Consumer prices are up 5.6% in the past year, the biggest year-over-year increase since January 1991. The CPI has surged at a 10.6% annualized rate in the past three months.

The core CPI has risen 2.5% in the past year, the biggest gain since January. The core rate's rising at a 3.5% annual rate in the past three months.

The CPI rose 1.1% in June, with the core rate up 0.3%.

So far, Fed officials, with a few vocal exceptions, have stuck to their forecast calling for inflationary pressures to moderate as the economy stagnates. Wages, a key linkage in any inflation spiral, have stagnant.

CPI for August should be much cooler, as petroleum and gasoline prices have fallen significantly since mid-July.

As far as July overall goes, the picture was undoubtedly ugly, with just a few bright spots on the inflation front.

Owners' equivalent rent, which accounts for nearly a quarter of the CPI, rose just 0.1%.

Medical-care prices nosed up 0.1%, including a 0.2% drop in medical commodities.

New car prices increased 0.2%.

But elsewhere, inflation raged.

Energy prices rose 4% in July, led by increases of 4.1% for gasoline and 7.4% for natural gas.

Food prices increased 0.9%, with the price of food at home jumping 1.2%. Prices rose by 1.8% for cereals and bakery goods, by 1.6% for dairy products, and by 1% for meat, poultry and eggs.

Apparel prices rose 1.2%, the most in 10 years.

Tobacco prices also increased at a 1.2% clip.

Housing costs increased 0.6%, boosted by a 3.8% increase in energy costs. Rents rose 0.3%, while the price of lodging away from home was up 0.7%.

With prices for urban wage earners up 0.9%, wages flat and hours worked falling, real weekly wages (adjusted for inflation) fell 0.8% in July. In the past year, real weekly earnings have fallen 3.1%.

In a separate report, the Labor Department said the trend of new applications for unemployment benefits rose to a six-year high, while the number of continuing claims hit the highest mark since late 2003.