Grocery bills push up price index

The Labor Department says its consumer price index, after holding steady in July, rose a seasonally adjusted 0.7 percent in August, for an annual rate of 8. 6 percent.

Declining mortgage interest rates were overshadowed by the sharpest monthly food price increase n five years. Grocery prices, particularly for meat, poultry, and eggs, increased 2.3 percent, largely because of the recent drought and heat wave the devastated the nation's agricultural belt.

The transportation category rose 0.9 percent, its largest increase in five months. Most of the increase was caused by new and used car price increases -- 1.7 and 2.3 percent, respectively. One encouraging aspect, though, was gasoline prices, which, after seasonal adjustment, declined for the fourth straight month.

In an accompanying report, the Labor Department said the real spendable income of a typical urban worker with a wife and two children rose 0.3 percent in August. Most of the increase was attributed to the nation's improving economy, which sent thousands of laid-off workers back to work. The department noted, however, that real spendable income is 6.5 percent below its level of a year ago.