(Bloomberg) — The cost of living in the US was little changed in July for a second month, showing companies lack pricing power.The unexpected reading in the consumer-price index capped a 1.4 percent gain over the past 12 months, the smallest year-to- year increase since November 2010, the Labor Department reported yesterday in Washington.The median forecast of 85 economists surveyed by Bloomberg News called for an increase of 0.2 percent. The core index, which excludes volatile food and fuel costs, rose less than forecast.Companies may find it difficult to charge more while joblessness hovers above 8 percent.Tempered inflation makes it possible for Federal Reserve policymakers to take additional steps if needed to revive the economic expansion when they meet next month.“The environment is just not conducive to upward price pressure,” Sam Bullard, senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said before the report.“A lot of firms can’t pass along fuel surcharges. Pricing power for manufacturers is still quite limited, consumer demand is still very weak.”Manufacturing in the New York area unexpectedly contracted in August for the first time since October, indicating factories are cutting back amid the global economic slowdown, another report today showed.Manufacturing ContractsThe Federal Reserve Bank of New York’s general economic index fell to minus 5.9 from 7.4 in July.The median estimate in a Bloomberg survey of economists was 7.0. Readings less than zero signal contraction in the so-called Empire State Index, which covers New York, northern New Jersey and southern Connecticut.Treasuries securities trimmed earlier losses after the reports, putting the yield on the benchmark 10-year note at 1.78 percent compared with 1.74 percent late yesterday.Declining prices for a broad-range of goods and services, including hotel rates, airline fares and new and used cars helped offset rising costs for medical care and rents, the report showed.Economists’ estimates in the Bloomberg survey ranged from unchanged to a gain of 0.4 percent. Economists forecast a 0.2 percent gain in the core index, according to the survey median.The core CPI climbed 0.1 percent in July and was up 2.1 percent over the past 12 months, the smallest year-to-year increase since October 2011.Energy costs decreased 0.3 percent from a month earlier, while food prices rose 0.1 percent.A worst-in-a-generation drought from Indiana to Arkansas to California is damaging crops and rural economies and could lead to higher consumer costs at the supermarket in the coming months.Paychecks are failing to keep up with even limited inflation. Hourly earnings adjusted for inflation were little changed in July after a 0.3 percent increase the prior month, and were up 0.2 percent over the past 12 months.Dick’s Sporting Goods Inc. is among companies having mixed success in boosting prices, getting customers to pay more for some items and having to pull back on others.“Some of them worked out fine and the customer accepted them and some other ones didn’t,” Edward Stack, chairman and chief executive officer of the Coraopolis, Pennsylvania-based retailer, said on an August 14 earnings call.