WASHINGTON (Reuters) - Higher food costs boosted U.S. inflation, while an indicator of future home construction was the weakest in a decade, signaling continuing deterioration in housing, reports showed on Wednesday.U.S. consumer prices rose by a slightly bigger-than-expected 0.2 percent in June on higher food costs. But the increase in the more closely watched core price index, which strips out volatile food and energy prices, was directly in line with expectations.The pace of U.S. home construction rose 2.3 percent in June but building permit activity, a sign of future construction plans, sank to its lowest rate in 10 years according to government data, flagging further weakness in the lackluster housing market."Home builders have hardened to the fact that housing will not recover soon," said Christopher Low, chief economist with FTN Financial in New York.Treasury bond prices rose slightly after the report on the benign core inflation, while the dollar firmed against the euro and U.S. stock futures remained lower.Food prices advanced 0.5 percent in June, continuing a string of increases. They contributed 17 percent to the overall CPI increase in the first half of this year.Energy prices were down 0.5 percent last month, but the Labor Department said for the first half of this year, they advanced at a 27.8 percent seasonally adjusted annual rate and accounted for about 48 percent of the advance in the overallCPI.Since June, energy costs have surged, with crude oil prices rising to 11-month highs.Ex-food, ex-energy prices were up 2.2 percent from the same time a year ago, in line with expectations. The overall CPI was up 2.7 percent from a year ago, slightly more than the 2.6 percent advance economists were expecting."On balance the numbers show inflation is relatively contained (which is) not likely to move the dollar too much, especially ahead of Fed Chairman (Ben) Bernanke's statements this morning," said Omer Esiner, foreign exchange market analyst with Ruesch International in Washington.Investors and economists were waiting to hear Bernanke's views on inflation, housing and the economy's overall trajectory. The Fed Chairman is scheduled to testify on the Fed's semiannual monetary policy report before the House of Representatives Financial Services Committee at 10 a.m. (1400 GMT).
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