WASHINGTON — Consumer prices in August posted the first monthly decline in nearly two years as Americans finally got some relief from surging energy prices. But the cost of food and clothing still rose last month and wages over the past year are down.

Consumer prices edged down 0.1 percent last month, the Labor Department reported yesterday, a significant improvement from a 1.1 percent price spike in June and a 0.8 percent rise in July.

The cost of gasoline and other fuels plunged during the month, reflecting big drops in crude oil prices since they peaked at $147 per barrel in early July.

Analysts said the August decline should be followed by more price moderation in coming months if prices continue falling. This will give the Federal Reserve more room to cut interest rates if needed to combat the current severe bout of market turmoil.

"Virtually all the inflation indicators are on the wane. Labor markets are weak and compensation gains slight," said Kenneth Beauchemin, a senior economist at Global Insight, a Lexington, Mass., consulting firm.

The central bank met yesterday but decided to leave interest rates unchanged despite the dip in prices seen in the consumer inflation report. The Fed said in a statement that the risks of weak growth and higher inflation both remained "of significant concern."

Lehman Brothers filed for bankruptcy protection on Monday and Merrill Lynch was forced into selling itself to Bank of America as a severe credit crisis triggered the biggest restructuring of Wall Street since the 1930s.

Even with the overall drop in prices because of the huge decline in energy, consumers were still getting squeezed in a number of areas.

Food prices posted a sharp 0.6 percent increase in August and so far this year are up at an annual rate of 7.5 percent — considerably faster than the 4.9 percent increase in food costs for all of 2007.

Clothing prices shot up 0.5 percent in August after an even bigger 1.2 percent rise in July, gains that economists said reflected the weaker dollar, which has boosted U.S. exports but increased the cost of imports such as clothing for American consumers.

Even with the dip in overall prices, paychecks continued to be under pressure. Weekly wages of non-supervisory workers dropped by 2.5 percent in August compared to a year ago, the 11th straight month in which wages have been down on a year-over-year basis.

The stagnant wages have become an issue in the presidential campaign with both Republican Sen. John McCain and Democratic Sen. Barack Obama promising to change tax and other economic policies in an effort to address the squeeze on the middle class.

Democrats on the Senate Joint Economic Committee released a report yesterday contending that families are spending twice as much on household expenses now as they did in 2000, a period when median household incomes have been stagnant.

"Over the last seven years, families' pockets have been picked at the grocery store, the gas pump and each time they make their home energy, healthcare and mortgage payments," said Sen. Charles Schumer, D-N.Y.

The 0.1 percent drop in consumer prices in August was the first monthly decline since prices fell by 0.5 percent in October 2006, another time when energy prices took a big decline.

Core inflation, which excludes energy and food, was also well-behaved in August, edging up by a slight 0.2 percent, after two months when core prices had risen by 0.3 percent. Both the overall decline and the small increase in core inflation were in line with economists' expectations.

Over the past 12 months, overall inflation is up by 5.4 percent. That's a slight improvement from the 5.6 percent rise for the 12 months ending in July, which had been the largest year-over-year increase in 17 years.

Energy prices plunged by 3.1 percent in August, the biggest one-month drop since October 2006, as gasoline prices fell by 4.2 percent.