Washington ? Consumer inflation inched up in July hitting the wallets of motorists and Americans needing medical care.

The Labor Department reported Friday that its Consumer Price Index, the government’s most closely watched inflation gauge, rose by a seasonally adjusted 0.1 percent for the second month in a row.

The latest reading on the CPI was better than the 0.2 percent rise many analysts were expecting and provided fresh evidence that inflation remains under control.

That’s good news for Federal Reserve Chairman Alan Greenspan and his colleagues because tame inflation gives them leeway to keep interest rates low in an effort to help the struggling economic recovery.

“Inflation looks good. It is not even flashing yellow on the Fed’s radar screen,” said Richard Yamarone, an economist with Argus Research Corp.

In a fresh sign of the slowing recovery, the Commerce Department said housing construction in July fell by 2.7 percent for the second straight month.

Though weaker than many analysts expected, July’s decline left the level of housing units under construction at a seasonally adjusted annual rate of 1.65 million, a respectable pace.

The slowdown comes in the face of low mortgage rates. Rates on 30-year mortgages dipped this week to 6.22 percent, the lowest level in 32 years of record keeping by Freddie Mac, the mortgage company.

“I think the weakness of the economic recovery and the weakness of the stock market had dampening effects,” said Michael Carliner, economist at the National Association of Home Builders.

For consumers, one of the few benefits of the lackluster recovery is that many firms have little leeway to raise prices.

In July, clothing prices fell 1 percent, the biggest decline since April. Air fares declined 1.3 percent, the largest drop since November. Prices for new cars and trucks were flat.

Medical costs, however, continued to rise. They rose 0.7 percent in July, the largest increase since May 1993. After being flat in June, energy prices rose 0.4 percent in July. Falling prices for electricity and natural gas were swamped by a 1.5 percent increase in gasoline prices and a 0.9 percent rise in fuel oil costs.