Food and Oil Push Inflation to 17 Year High

by Michelle Franzen

NBC News

Americans may be buying less in this struggling economy, but they are paying more for those goods and services.

July's Consumer Price Index shot up at twice the rate than expected.

In the past year, retail inflation has surged five percent to its fastest pace in nearly two decades.

The index excludes food and energy prices, but analysts say those factors are still having an impact on everyday expenses.

"When you look at the high oil prices it's seeping into every sector of the economy, food, retail purchases and things of that nature," said Wall Street Journal editorial board member Stephen Moore.

When oil and gas prices pinched household pocketbooks, Americans squeezed back and retailers have the bruised budgets to prove it.

"This is a tight economy, we are seeing a shift in spending, moving away from  discretionary spending to necessity spending," noted the National Retail Federation's Scott Krugman.

There are some signs of relief for consumers.

Crude oil futures have dropped in the past month and gas prices are below four dollars a gallon on average.

Still, it may not be enough to motivate shoppers in an economy still grappling with a credit and housing crunch and a spike in jobless claims. 
Foreclosures rates are also dogging the economy.

According to Realty Trac foreclosure filings in July were up 55 percent compared to the same time last year.