Northwest Arkansas Democrat-Gazette
Consumer prices edge up in May
Cheaper gas, electricity, used cars help hold inflation steady
WASHINGTON — U.S. consumer prices increased a slight 0.1% in May, as inflation was tempered by lower costs for gasoline, electricity and used cars.
The Labor Department said Wednesday that the consumer price index rose 1.8% during the past year. Excluding the volatile food and energy categories, core prices rose 0.1% in May and 2% from a year ago. Economists surveyed by Bloomberg had predicted a 2.1% increase.
Stocks declined on the report, which follows other signs of slowing economic growth at home and abroad — as well as uncertainty over the impact of President Donald Trump’s tariffs on Chinese goods — that have bolstered expectations for Fed rate cuts this year. Fed officials will next meet June 18-19.
Inflation has been consistently muted, slightly below or near the Federal Reserve’s target of 2% even though the economy is poised in July to set the record for the longest expansion in U.S. history.
Falling unemployment rates and a pickup in wages have done little to push prices higher. Adjusted for inflation, average hourly earnings have climbed 1.3% in the past year. That same annual figure was up just 0.2% in May 2018.
Fed Chairman Jerome Powell has previously suggested — based on a separate measure known as personal consumption expenditures — that the low inflation is temporary. But the May consumer prices report does raise questions about how persistent soft inflation might be.
“The weakness in inflation is starting to look less transitory,” said Leslie Preston, a senior economist at Toronto-Dominion Bank. “While core CPI inflation is still at 2%,
the Fed’s preferred measure has typically been a few ticks lower, and today’s report does not bode well for an uptick in inflation there. It gets harder and harder to dismiss the benign inflation on any one factor or any month-to month swing.”
Food prices rose 0.3% in May after having dipped in April. Non-alcoholic beverages increased 1.2% last month.
A sharp drop in usedcar prices helped drive the monthly change, while cheaper gasoline played a role in keeping broader inflation tame. Energy prices fell 0.6% from the previous month and 0.5% from a year earlier as all major components in the category fell on an annual basis. Electricity prices were down 0.8%.
The index for used cars and trucks slumped 1.4% in May, the fourth-straight decline.
Apparel prices were unchanged after two steep declines. Readings have trended lower after the Commerce Department changed its data collection methodology.
Shelter prices — the largest component of the index — increased 0.2% in May, after notching gains of 0.4% in the previous two months. Owners-equivalent rent, one of the categories that tracks rental prices, increased 0.3%. Rent of primary residence rose 0.2%.
Medical-care expenses rose 0.3% in May, matching the increases in April and March.
While Trump raised tariffs on some Chinese goods early in May, the effect wouldn’t apply broadly until imports reach their final destination and may not filter through into consumer prices for some time.
Economists surveyed by Bloomberg had forecast the core gauge would rise 0.2% from the previous month and 2.1% from a year earlier, with corresponding gains of 0.1% and 1.9% projected for the broader index.