Consumer Price Index hits three-year high

High energy prices in the metropolitan area were primarily to blame for driving up inflation over the last year.

For the 12 months that ended in August the Consumer Price Index rose 3.5 percent -- the biggest yearly increase in 34 months, according to the U.S. Bureau of Labor Statistics.

The core index, which excludes food and energy prices, increased 2.2 percent over the last year. August marked the first time since November 2008 that both indexes registered 12-month increases exceeding 2 percent, the bureau said.

"Households are forced to spend more on necessities, leaving them less discretionary spending power," said Pearl Kamer, chief economist for the Long Island Association. "This is occurring in a stagnant economy, and it's looking more and more like it's slipping into a double-dip recession."

The accelerating inflation will constrain the Federal Reserve's efforts to further stimulate the economy, she said.

Shelter and apparel prices -- which went up 0.3 percent and 6.5 percent respectively -- were the main factors in boosting the monthly Consumer Price Index by 0.4 percent. However, apparel prices typically increase in August when the fall and winter lines are introduced, the bureau's report noted.

For the month, energy prices declined 1.7 percent. Gasoline prices fell by 0.4 percent, making it the third straight month of decreases. Household energy prices dropped 2.9 percent, mostly because of a 5 percent dip in electricity charges.

But over the year, energy prices went up 16.5 percent, and gasoline prices spiked 37.3 percent. Groceries increased 5.1 percent, and the cost of dining out rose 3 percent. Apparel prices climbed 5 percent over the year, and prices for shelter rose 1.8 percent -- the largest 12-month increase since 2009.

Spending for services makes up two-thirds of consumer spending, with retail sales accounting for the remaining third, Kamer said. Inflation forcing consumers to spend more of their money on necessities and cut back on services is one factor that could drive the economy into a recession again.

Allen Levy and his family already have incorporated a number of strategies to save money, he said. They try to combine their trips, drive less in rush hour so they use less gas and cut back on eating out.

"You try to buy larger quantities that will get you a discount, and you don't go for the brand-name item even in clothing," Levy said. "It's just a part of your life, and you become more comfortable with it."

Frederick Lelle, 78, of Manorville, said he is comfortable living off savings and Social Security, but he has felt the dramatic rise in gas prices.

"It's the gasoline prices that will put people in trouble with the mortgages and other payments," he said. "I think that's the big problem."