U.S. consumer prices fell in August for the first time in nearly two years in response to falling energy prices, according to new figures released by the U.S. Labor Department on Tuesday. The report showed consumer prices down 0.1 percent last month. The drop came after a 1.1 percent price rise in June and a 0.8 percent rise in July. The decline was in line with predictions, and comes as the cost of energy has fallen across the board. Energy prices dropped 3.1 percent in August, the biggest one-month drop since October 2006. Gasoline prices were down 4.2 percent, natural gas 5.8 percent and home heating oil prices fell 9.6 percent. The data could give the Federal Reserve the room to consider an interest rate cut as the financial markets struggle. 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. Core inflation, which excludes volatile energy and food prices, rose by 0.2 percent, after two months when the figure had risen by 0.3 percent. Both the overall decline and the core inflation rise were in line with economists' expectations. The data showed that food costs continued to rise in August, up 0.6 percent after a 0.9 percent increase in July. Prices for clothing posted a 0.5 percent gain during the month while the price of airline tickets, reflecting previously monthly gains in jet fuel, showed a 1.6 percent increase. But while costs rise, salaries are not, accord to the Tuesday figures. 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. Over the past 12 months, overall inflation is up by 5.4 percent, slightly better than the 5.6 percent rise for the 12 months ending in July. That was the largest year-over-year increase in 17 years. Core inflation is up 3.4 percent over the past 12 months.