U.S. Consumer Prices Rise 0.4% in May

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The FINANCIAL — U.S. consumer prices posted the largest monthly increase in May in more than two years, a sign modest inflation pressures are beginning to build, according to Nasdaq.

The consumer-price index, which reflects what Americans pay for everything from cars to cans of tuna, rose a seasonally adjusted 0.4% in May from a month earlier, the Labor Department said on June 18. That was the largest gain since February 2013. Higher gasoline prices pushed up the overall index. Excluding volatile food and energy categories, so-called core prices increased 0.1%.

Economists surveyed by The Wall Street Journal had expected overall prices to increase 0.5% and core prices to rise 0.2%.

Compared with a year earlier, overall prices were unchanged and core prices were up 1.7%.

The consumer-price index has now risen for four straight months after falling from November through January. That decline largely reflected the tumbling cost of a barrel of crude oil, which topped $100 last summer but then dropped below $50 earlier this year. Prices have since firmed near $60.

Energy prices rose 4.3% last month, but are still down 16.3% from a year earlier. Gasoline prices were up 10.4% on a seasonally adjusted basis in May, the largest monthly gain since June 2009. Gasoline prices remain 25% below year- earlier levels.

Food prices were unchanged last month and were up 1.6% from a year earlier.

Federal Reserve officials are looking for signs of firmer inflation before they move to raise short-term interest rates from near zero. The central bank left rates unchanged following a meeting on June 17.

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The Fed’s preferred inflation gauge, the Commerce Department’s personal consumption expenditures price index, rose 0.1% from a year earlier in April. The measure has stayed below the Fed’s 2% annual inflation target for three years.

The central bank said below-target inflation partly reflects declines in prices for energy and imports, but noted that at least energy prices have appeared to stabilize recently.

Still, a stronger dollar has made imported goods relatively cheaper for American consumers. For example, prices for apparel fell 0.5% last month.

“Import prices for non-oil imports continue to fall,” Fed Chairwoman Janet Yellen said. “I think that’s serving to push down core inflation a little bit. Eventually I expect that impact to ebb, but it is a factor affecting the outlook.”

Thursday’s report showed shelter prices and the medical-care index both rose 0.2% in May.

Airline fares, which had declined in five of the prior six months, rose sharply in May, increasing 5.7%.

A separate Labor Department report showed American’s inflation-adjusted weekly earnings fell 0.1% in May. The decline reflects a pick up in inflation offsetting a modest increase in wages.

 

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