Inflation Hits 27-Year High

The Producer Price Index rose at more than double the expected rate

The prices paid for goods by businesses rose by 1.2 percent in July, lifting the overall rate of inflation to levels not seen since 1981. And when businesses pay more for goods and services, the costs is usually passed along to customers, so consumers can expect inflation to continue and spread beyond the sphere of rising fuel costs.

The Labor Department said its Producer Price Index rose by 1.2 percent in July, more than double the expected rate, and lifting the current annual rate to the loftiest level in 27 years. Even after stripping out food and energy, core prices rose by a higher-than-expected 0.7 percent, the biggest increase since November 2006.

The resurgence of inflation as a prime concern for investors arrives amid grim readings on the housing market and the banking sector. The Commerce Department said July housing starts fell to an annual rate of 965,000 units — higher than analysts predicted, but the lowest level in more than 17 years nonetheless.

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