U.S. Consumer Prices Rose Steadily in May
U.S. consumer prices last month notched the heftiest annual growth since the beginning of 2012, a further sign price pressures in the economy are solidifying.
The consumer-price index, which gauges what Americans pay for goods like lettuce and toys and services like haircuts, rose a seasonally adjusted 0.2% in May from the prior month, the Labor Department said Tuesday. Prices rose 2.8% last month from the prior year, the strongest reading since February 2012, when inflation was 2.9%.
Tuesday’s report came before Federal Reserve officials start a two-day meeting in which they are expected to raise rates to keep inflation under control. Still, its preferred inflation gauge shows milder price growth.
“Inflation isn’t surging, but it is persistently edging higher,” said Jim Baird, chief investment officer for Plante Moran Financial Advisors. “Remember the concerns about deflation just a few years ago? That ship has sailed.”
One driver of higher prices this year has been gasoline. The average cost for a gallon of regular gasoline was $2.90 in May, up from $2.48 in December, according to the U.S. Energy Information Administration. Tuesday’s report showed energy prices climbed a seasonally adjusted 0.9% last month and increased 11.7% from May 2017.
When excluding the volatile energy and food categories, so-called core prices also rose 0.2% in May. Economists surveyed by The Wall Street Journal expected both core prices and the headline index to increase 0.2% from April. The core gauge was up 2.2% on an annual basis.
Shelter prices also pushed the headline index higher, growing 0.3% in May. Lodging away from home, an underlying shelter index, increased 2.9% in May, the measure’s largest increase since last summer.
Price growth in May was uneven. While the medical care, education, communication and new vehicle indexes rose, the food, apparel, recreation and personal care indexes were flat. Household furnishings and operations and used cars and trucks prices fell in May.
Inflation, long sluggish in the wake of the 2007-09 recession, picked up in recent months. The Federal Reserve, which begins a two-day policy meeting Tuesday, is watching price data closely as it weighs the path of short-term interest rates.
Fed officials are widely expected to announce an increase in their benchmark short-term interest rate Wednesday, when they also will signal their plans for the second half of 2018. Accelerating price growth could prompt officials to raise rates somewhat more quickly, while fading inflationary pressures could allow them to move gradually to tighten policy.
The Fed’s preferred inflation measure, the Commerce Department’s personal-consumption expenditures index, rose 2% in April from a year earlier, matching the central bank’s annual inflation target for the second straight month. Prices excluding food and energy rose 1.8% from a year earlier.
In a separate report Tuesday, the Labor Department said inflation-adjusted average weekly earnings for private-sector workers rose 0.1% in May from the prior month.
Source: Dow Jones