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Cost of Living Gets Costlier

Linda Dodd, a nursing student at Georgetown University, checks on textbooks for classes. Tuition, books and supplies have risen sharply in the past year.
Linda Dodd, a nursing student at Georgetown University, checks on textbooks for classes. Tuition, books and supplies have risen sharply in the past year. (By Susan Biddle -- The Washington Post)

Still, the July increase in core inflation was milder than many financial analysts and traders had expected after four consecutive months of 0.3 percent increases, and it boosted confidence in the Fed's forecast that inflation would eventually abate.

Stocks and bonds rallied yesterday on expectations that the core inflation figure, combined with other reports showing the economy slowing, will help persuade the Fed not to raise interest rates further.

A Fed report released yesterday showed that the nation's industrial production -- the output of its factories, mines and utilities -- rose more slowly in July than in June. The Commerce Department said yesterday that construction of new homes and permits for new construction declined last month, adding to other signs of a cooling housing market.

But Fed policymakers also said last week that "some inflation risks remain," citing high prices for energy and raw materials, tightening labor markets, and other constraints on businesses' ability to produce goods and services. Businesses' usage of their production capacity, for example, rose to 82.4 percent from 82.3 percent, the Fed report said yesterday.

With unemployment low and wages rising, "we see it a bit too soon to celebrate the demise of inflation," said Stuart G. Hoffman, chief economist at PNC Financial Services Group. Wages have risen, but more slowly than prices, the Labor Department said in another report yesterday. Average weekly earnings fell 0.1 percent last month and bought 0.1 percent less in July than a year earlier, after adjusting for inflation, the department said.

Education expenses account for a small portion of the consumer price index, but they loom large in the budgets of many students and their families this time of the year and help illustrate how broadly inflation pressures are being felt.

Education bills, including tuition, books and school supplies, rose 0.6 percent last month, as many students and their families started preparing for the coming academic year. And they were 5.9 percent higher in July than a year before, rising faster than overall inflation.

"The books are very expensive," said Dodd, 30, of Arlington. So are tuition, room and board, she said.

One bright spot for students and other consumers has been falling prices for personal computers and related equipment, which dropped 0.9 percent in July. Prices also fell by a record 7.3 percent last month for women's and girls' clothing, even after adjusting for seasonal variation, the Labor Department said

On campus, "a lot of people are living on loans to pay their bills," Dodd said of her Georgetown classmates. "I think it's hard if you don't have the backing of your family."


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