The cost of living in the U.S., excluding food and energy prices, climbed in June more than forecast, easing concern that a slowdown in growth will spur deflation. The so-called core rate of the consumer-price index increased 0.2 percent, the most since October and exceeding the 0.1 percent gain projected by the median forecast of economists surveyed by Bloomberg News, figures from the Labor Department showed today in Washington. Prices overall fell 0.1 percent, a third straight decrease and matching the median forecast. The report showed rents, the biggest component in CPI, stabilized, while the cost of clothing and used cars climbed, diminishing the risk of deflation, or a protracted drop in prices. The lack of inflation gives Federal Reserve policy makers scope to leave the benchmark interest rate near zero in coming months to help invigorate the economy. “I can’t see any inflation risk,” Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, said before the report. “We remain in an environment of stagnant prices, as consumer demand remains under the thumb of a dismal labor market.” Treasury securities fell after the report, erasing earlier gains, and stock-index futures were little changed. The yield on the benchmark 10-year note was 3 percent at 8:41 a.m. in New York, little changed from late yesterday. Survey Median Consumer prices were forecast to decline 0.1 percent, according to the median forecast of 76 economists in a Bloomberg survey. Estimates ranged from a drop of 0.4 percent to a gain of 0.1 percent. In the 12 months ended in June, prices rose 1.1 percent following a 2 percent year-over-year gain the prior month. Economists had forecast a 1.2 percent rise in the 12 months to June, according to the survey median. The core rate rose 0.9 percent from June 2009, matching the smallest year-over-year gain since 1966. Compared with a month earlier, energy costs decreased 2.9 percent, and food costs were unchanged. The European debt crisis has weighed on the value of the euro may keep damping U.S. inflation in coming months. At the same time, American exports to Europe may slow as a stronger dollar holds down the cost of imported goods. Rents Stabilize Owners-equivalent rent, one of the categories designed to track rental prices, rose 0.1 percent, the first increase since August 2009. Apartment vacancies in the U.S. dropped in the second quarter from the previous three months, the first quarterly improvement in two years, according to Reis Inc., a real estate research firm. The improvement signal rents may soon stabilize. The vacancy rate for apartment properties was 7.8 percent, down from a 30-year high of 8 percent in the first quarter and up from 7.7 percent a year earlier, according to a July 8 report from Reis. First-quarter vacancies were the highest since 1980, when the company began tracking the data. Some companies are reducing prices to spur sales. Amazon.com Inc., the world’s largest online retailer, last month cut the cost for its Kindle electronic reader 27 percent to $189, accelerating a price war with Barnes & Noble Inc., the bookstore chain that earlier announced a discount on its own e- book device, the Nook. Retailers are also taking steps to lure in shoppers. Staples Inc., the largest U.S. office-supply retailer, has increased inventory and is offering more discounts while spending more on advertising, said Demos Parneros, president of U.S. retail at the Framingham, Massachusetts-based company. “We are being very aggressive with good offers,” Parneros said. “It worked last year and customers responded. We need to generate more traffic into the stores.” The CPI is the broadest of three monthly price gauges from Labor, because it includes goods and services. Almost 60 percent of the CPI covers prices consumers pay for services ranging from medical visits to airline fares and movie tickets.

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