Annual inflation falls 1.3%, the fastest pace in 59 years
WASHINGTON (MarketWatch) - U.S. consumer prices increased a seasonally adjusted 0.1% in May as higher gasoline prices were largely offset by falling food prices, the Labor Department reported Wednesday.
It was the first increase in the consumer price index in three months.
The core CPI - which excludes often-volatile food and energy prices -- also rose a seasonally adjusted 0.1% in May.
The CPI has fallen 1.3% in the past year, the sharpest decline in prices since April 1950. The Federal Reserve has warned that deflation remains a major risk to the economy, with the global recession putting downward pressure on prices. Slack in the economy - a high unemployment rate and many idle factories - should keep inflation in check, they say.
The entire decline in prices over the past year was due to the 27.3% drop in energy prices. Crude oil and gasoline prices have turned higher recently, however.
Core prices have not shown much deceleration, one indication that deflation is not in the cards. The core CPI is up 1.8% in the past year.
The 0.1% rise in the headline CPI in May was much lower than the 0.3% forecast by economists surveyed by MarketWatch. The consensus on the core CPI was right.
Energy prices rose 0.2% in May, the first increase since February. Gasoline prices rose 3.1% on a seasonally adjusted basis. Natural gas prices fell 5.7%.
Food prices fell 0.2%, the fourth straight decline. Prices of food purchased to consume at home fell 0.5%. Fruit and vegetable prices fell 1%, while meat prices dropped 0.9%. Food prices are up 2.7% in the past year.
Inflation-adjusted weekly wages fell 0.3% in May, as hours worked fell 0.3%. In the past year, real weekly wages rose 2.8%.
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Shelter costs, which account for a third of the CPI, increased 0.1% in May. Ownership equivalent rent (the cost of owning a home) rose 0.1%. Rents rose 0.1%. Hotel and motel fares rose 0.1%.
Medical care costs increased 0.3% in May. Prescription drug prices rose 0.6%.
Transportation prices increased 0.8%, led by fuel prices. New car prices rose 0.5%. Airfares fell 1.5%.
Apparel prices fell 0.2% for the third straight month.
Education and communication prices rose 0.3%. Tuition prices rose 0.6%.
Tobacco prices fell 0.3% after a 20% increase the previous two months as a new federal excise tax took effect.
