INDICATOR: July Consumer Price Index/Real Hourly Earnings

KEY DATA: CPI: 0.0 percent; Excluding Food and Energy: Up 0.1 percent/Real Earnings: 0.0 percent

IN A NUTSHELL: “Tame inflation is helping keep purchasing power from falling, but that may not continue for much longer.”

WHAT IT MEANS: Federal Reserve Chairman Ben Bernanke keeps saying that inflation is tame, and we are seeing that that is the case, at least through July.

The Consumer Price Index didn’t move at all over the month, as energy prices declined and food costs remained stagnant. Slicing and dicing the data in any way you want, it is still hard to find where consumer costs are on the rise.

As usual, medical care remains an outlier, led by a jump in drug prices, and education continues to live in its own magical world, posting another big rise. Over the year, college tuition is up 5.4 percent compared with a 1.4 percent increase for all consumer goods and services.

But otherwise, the number of goods showing high or even moderate gains is limited. One interesting area where costs are on the rise is rent, which is finally starting to reflect what everyone is seeing in the real world.

With wages going nowhere, the flat consumer prices meant that inflation-adjusted earnings didn’t fall during the past month.

MARKETS AND FED POLICY IMPLICATIONS: Inflation is going to be an ever-important factor in the U.S. economic recovery.

With the unemployment rate so high, firms have no reason to pay up for labor, and they are not doing so. As a consequence, wage and salary gains are largely nonexistent.

That means almost any increase in consumer costs, no matter what the source is, will erode spending power.

We already know that gasoline prices have soared, and the impact of the drought will be with us for quite a while.

Grain-price increases will show up as they move through the production chain. Meat and poultry prices could fall initially, as farmers thin herds because they cannot afford to feed them, but that would lead to rising prices later.

While some may argue that gasoline prices are up because of refinery issues, the increases started well before the fires. And I just get tired of the argument that it is either distillates or crude or politics or growth or geopolitical risks or whatever is the excuse du jour for the latest round of energy-price increases.

Very simply, even after the fire, we were not going to get any shortages if the price of gasoline remained where it was. Thus, the surge in prices makes no real economic sense given actual supply and demand.

Buy hey, why let economics get in the way of a good trade.

The point is that food prices are on the rise, and while energy costs may waffle, the trend is up even as labor incomes stagnate. The combination of top-line inflation and no income gains does not bode well for consumption, and political and “fiscal cliff” uncertainties notwithstanding, if consumers were spending at a rapid pace, firms would be hiring.

Until we see some improved wage gains, don’t expect increased spending or hiring or economic growth.