US Inflation in May Surges, Annual Inflation Rate at 2.1%

United States inflation rose sharply in May for the second straight month and the annual inflation rate logged in with the biggest increase in 18 months.

Gains were "broad-based," the US Labor Department reported Tuesday, June 17, led by steeper prices that American consumers paid for energy and food.

US consumer prices rose 0.4% in May, the Labor Department’s Bureau of Labor Statistics (BLS) said in its monthly report of the Consumer Price Index. The CPI measures changes in prices that US consumers pay for a select group of goods and services. The increase was higher than most forecasts, the most since the 0.7% increase in February 2013, and follows the 0.3% advance in April.

"The data suggests inflation may begin to trend modestly higher, but excessive inflation appears unlikely in the absence of stronger growth, further tightening in labor market conditions, and greater pressure on wages," MarketWatch quoted Jim Baird, chief investment officer at Plante Moran Financial Advisors.

Food prices jumped 0.5% in May, the biggest gain since August 2011, and after three straight monthly increases of 0.4%. The cost of food was flat as recently as December with prices rising at a more modest pace of 0.1% in January. Most grocery store produce tracked by the government rose last month. As examples, meats, poultry, fish, and eggs went up 1.4%, fruits and vegetables rose 1.1%, and dairy and related products climbed 0.6%.

"The only major grocery store food group index to decline in May was cereals and bakery products, which fell 0.1 percent," the CPI report stated.

Overall, food prices have surged 2.5% from a year ago.

Energy prices jumped 0.9% in May after the prior monthly increase of 0.3%. They fell in March and February but have advanced 3.3% over the past 12 months. Prices at the pumped rose less briskly at 0.7% compared to 2.3% in April. Gas prices dropped during each of the first three months of 2014 but they are still 2.3% higher than a year ago.

Core consumer prices advanced 0.3% in May, the largest increase since August 2011 and after two straight monthly increases at 0.2%. This core reading excludes food and energy categories that are almost always more volatile, with the most recent example being the surge in oil prices attributed to the sectarian violence in Iraq. Core advancing items included:

  • Shelter, up 0.3%
  • Rent, up 0.3%
  • Lodging away from home, up 0.2%
  • Medical care commodities, up 0.5%
  • Medical care services, also up 0.3%
  • Airfares, up 5.8% for the biggest increase since July 1999
  • New vehicles, up 0.2%
  • Clothing, up 0.3%
  • Personal care, up 0.2%
  • Tobacco, up 0.2%

Conversely, prices of used cars and trucks fell 0.1% and household furnishings declined 0.2%.

US inflation increased 2.1% over the last 12 months, the quickest annual inflation rate since October 2012. The annual rate of inflation was 1% as recently as October, which marked the smallest 12-month rise since October 2009. Past inflation rates reported by the BLS for 2014 include annual gains of 2% in April, 1.5% in March, 1.1% in February and 1.6% in January.

Core US inflation rose 2% in the year-over-year period ended May after rising 1.8% in April. Core 12-month inflation rates reported earlier in 2014 include the March increase of 1.7% and matching 1.6% gains in February and in January. Until last month, the core annual rate had been stuck between 1.6% and 1.8% for 13 months in a row. The core reading is the benchmark inflation figure monitored by the Federal Open Market Committee (FOMC) as it helps in deciding where to set the key interest rate. The latest annual increase is right at the Fed’s inflation rate target of 2%.

"We expect inflation continuing to rise gradually," Bloomberg News quoted Neil Dutta, head of U.S. economics at Renaissance Macro Research LLC in New York. "By year’s end, we suspect the Fed will acknowledge a neutral set of risks around the inflation outlook."

Tuesday’s inflation report came as the FOMC kicked off its monthly monetary policy meeting which concludes on Wednesday.

Found below are percentage changes of prices for consumer goods and services that are surveyed and analyzed by the Bureau of Labor Statistic of the US Department of Labor. The data periods are monthly from November to May and over the past 12 months.

November 2012 – May 2014 Consumer Prices – Gains & Losses in Percent

  Nov 2013 Dec 2013 Jan 2014 Feb 2014 Mar 2014 Apr 2014 May 2014 12 Month
All items 0.1 0.2 0.1 0.1 0.2 0.3 0.4 2.1
  Food 0.1 .0 0.1 0.4 0.4 0.4 0.5 2.5
    Food at home .0 .0 0.1 0.5 0.5 0.4 0.7 2.7
    Food away from home 0.3 0.1 0.1 0.3 0.3 0.3 0.2 2.2
  Energy -0.4 1.6 0.6 -0.5 -0.1 0.3 0.9 3.3
    Energy commodities -0.8 2.6 -0.5 -1.3 -2.0 1.9 0.6 2.7
      Gasoline (all types) -0.8 2.6 -1.0 -1.7 -1.7 2.3 0.7 2.3
      Fuel oil 0.4 2.4 3.7 4.1 -2.9 -3.0 -1.4 5.3
    Energy services .0 0.1 2.2 0.7 2.6 -1.9 1.4 4.4
      Electricity 0.5 0.4 1.8 -0.2 1.1 -2.6 2.3 3.6
      Utility (piped) gas service -1.5 -1.0 3.6 3.6 7.5 0.3 -1.7 7.3
  All items less food, energy 0.2 0.1 0.1 0.1 0.2 0.2 0.3 2.0
    Commodities less food, energy .0 .0 -0.1 -0.1 .0 0.1 0.1 -0.2
      New vehicles -0.1 .0 -0.3 0.1 .0 0.3 0.2 0.5
      Used cars and trucks 0.3 .0 -0.5 -0.1 0.4 0.5 -0.1 0.2
      Apparel -0.1 0.4 -0.3 -0.3 0.3 .0 0.3 0.8
      Medical care 0.1 -0.6 0.5 0.6 -0.3 0.3 0.5 2.5
    Services less energy 0.3 0.1 0.2 0.2 0.3 0.3 0.3 2.7
      Shelter 0.3 0.2 0.3 0.2 0.3 0.2 0.3 2.9
      Transportation 0.3 -0.4 0.1 0.3 0.2 0.7 1.0 3.1
      Medical care .0 0.2 0.2 0.2 0.3 0.3 0.3 3.0

 

United States inflation data from the Bureau of Labor Statistic is released every month and available usually about two weeks into a month, published after analyzing the data collected by the end of the reference month. Data for June inflation, in the form of the Consumer Price Index (CPI) and BLS summary report, is scheduled slightly later next month as the release happens on July 22, 2014.

Consumer Price Index data is used as the basis to calculate monthly and annual inflation rates and it is also used by this site’s inflation-adjusting calculator. The Inflation Calculator displays accumulated inflation and shows the change in buying power of the US dollar between two dates.

One thought on “US Inflation in May Surges, Annual Inflation Rate at 2.1%”

  1. Try entering a salary in 1965 of $16,000. See what it is in 2014. In 1965 it was easy to make this money WITHOUT a college degree. What are most college grads getting paid when they get out of college? This shows that a BIG decrease in our standard of living has occurred, and it is still heading down.

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