HomeInflationUS Inflation Eases as Consumer Prices Fall Sharply in May 2012

US Inflation Eases as Consumer Prices Fall Sharply in May 2012

US inflation eased over the past year as consumers prices fell in May by the most in more than three years, the US government reported Thursday.

Thanks to sharply lower gasoline costs and leveled food prices, American consumers were able to better handle increases in items like clothing, transportation, shelter and medical care.

Consumer prices declined 0.3 percent in May after being flat in April, the US Labor Department reported. It was the first downturn since October and the biggest drop since December 2008.

Many government tracked items rose modestly, but overall food costs were flat and prices at the pump declined 6.8 percent after surging earlier in the year. In looking back, gas prices were down 2.6 percent in April and Americans then had paid 0.2 percent more on food for a second straight month.

"The (inflation) news is good for consumers, since it signals relief at the gasoline pump and at the grocery store,” Gault wrote in a report that was cited on USATODAY.com. "It will help prop up spending against a gloomier labor-market backdrop. It’s also good news for producers (except for those in the commodity business), since it shows cost pressures easing."

Stripping out food and energy prices which tend to be more volatile, the so-called core US inflation rate rose 0.2 percent in May for the third straight month.

"The indexes contributing to the increase were largely the same ones as in April: shelter, medical care, used cars and trucks, apparel, airline fares, and new vehicles," the US Labor Department said in its monthly Consumer Price Index (CPI) report which is the government’s key measure of US inflation. "The indexes for household furnishings and operations and for tobacco declined," it added.

US inflation climbed 1.7 percent over the past year after rising 2.3 percent in April. It was at 3.9 percent as recently as September. Cheaper energy prices are the main factor for the easing.

"The drop in the headline is encouraging for the Fed because it shows gasoline prices are less of strain on consumers’ incomes, which means they can pick up spending in the summer months," Bloomberg quoted Jeffrey Greenberg, an economist at Nomura Securities International LLC in New York, who correctly forecast the decline in prices. "Unemployment is the Fed’s big concern. They aren’t worried about inflation going out of control."

Still, and for a bit of perspective, while gasoline prices are 4.0 percent lower than last year, they are a 31.1 percent higher than the same time two years ago.

Core US inflation showed a familiar 2.3 percent gain for the year, matching the 12-month readings in April and March.

The core inflation rate continues above the Federal Reserve’s 2.0 percent target area, although the central bank is more worried about US jobs numbers than inflation at this point.

The following grid offers US Labor Department inflation data ranging from November to May and on a 12-month basis.

May 2012 Consumer Prices – Gains (percent)

  Nov
2011
Dec
2011
Jan
2012
Feb
2012
Mar
2012
Apr
2012
May
2012
12
Month
All items .0 .0 0.2 0.4 0.3 .0 -0.3 1.7
  Food 0.1 0.2 0.2 .0 0.2 0.2 .0 2.8
    Food at home -0.1 0.3 .0 .0 0.1 0.2 -0.1 2.7
    Food away from home 0.3 0.2 0.4 0.1 0.2 0.3 0.2 2.9
  Energy -1.6 -1.3 0.2 3.2 0.9 -1.7 -4.3 -.39
    Energy commodities -2.1 -1.9 0.9 5.7 1.7 -2.6 -6.4 -3.7
      Gasoline (all types) -2.4 -2.0 0.9 6.0 1.7 -2.6 -6.8 -4.0
      Fuel oil 2.7 -1.0 1.4 2.8 2.7 -1.1 -2.8 -1.1
    Energy services -0.7 -0.3 -0.8 -0.8 -0.4 -0.2 -0.7 -3.6
      Electricity 0.4 -0.2 .0 .0 -0.8 0.2 0.3 0.2
      Utility (piped) gas service -4.4 -0.8 -2.9 -3.4 0.9 -1.8 -4.1 -14.9
  All items less food, energy 0.2 0.1 0.2 0.1 0.2 0.2 0.2 2.3
    Comm. less food, energy 0.1 -0.2 0.2 0.1 0.2 0.2 0.2 1.6
      New vehicles -0.3 -0.2 .0 0.6 0.2 0.4 0.2 1.3
      Used cars and trucks -0.1 -0.9 -1.0 -0.2 1.3 1.5 1.0 3.5
      Apparel 0.6 -0.1 0.9 -0.9 0.5 0.4 0.4 4.4
      Medical care 0.2 0.2 0.6 0.8 0.4 .0 .0 2.7
    Services less energy 0.2 0.3 0.2 0.1 0.2 0.3 0.2 2.5
      Shelter 0.2 0.2 0.2 0.2 0.2 0.2 0.2 2.3
      Transportation 0.1 0.1 .0 -0.2 0.3 0.5 0.3 1.9
      Medical care 0.5 0.4 0.2 .0 0.3 0.4 0.5 3.9

 

The US Labor Department will make available June 2012 Consumer Price Index information on July 17, 2012 at 8:30 AM Eastern Time. Current and historic CPI information is used as the core data for this site’s US Inflation Calculator.

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1 COMMENT

  1. Hello,
    I would like to know the difference between the US inflation rate and the monthly CPI. I thought they were the same. So, for example, how can the US rate be 2.7% and the monthly rate 0.3%?

    Thanks,
    Vic

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