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Financial News: U.S. Consumer Prices Show Modest Decrease In May

U.S. Consumer Prices Show Modest Decrease In May

06/10/2020 - 09:36:00 (RTTNews)

(RTTNews) - After reporting the biggest drop in U.S. consumer prices in over a decade in the previous month, the Labor Department released a report on Wednesday showing a modest decrease in consumer prices in the month of May.

The Labor Department said its consumer price index edged down by 0.1 percent in May after slumping by 0.8 percent in April. Economists had expected consumer prices to come in unchanged.

The dip in consumer prices came amid a continued decrease in energy prices, which tumbled by 1.8 percent in May after plunging by 10.1 percent in the previous month. Prices for gasoline and fuel oil showed notable declines.

Meanwhile, the report said food prices increased by 0.7 percent in May following a 1.5 percent jump in April. The continued growth was driven by higher prices for meats, poultry, fish, and eggs, with the beef index showing its largest ever monthly increase.

Excluding food and energy prices, core consumer prices also slipped by 0.1 percent in May after falling by 0.4 percent in April. Core prices were also expected to come in unchanged.

The modest drop in core prices reflected significant decreases in prices for motor vehicle insurance and apparel as well as lower prices for airline fares and used cars and trucks.

Higher prices for shelter, recreation, medical care, household furnishings and operations, and new vehicles helped limit the downside.

Compared to the same month a year ago, consumer prices in May were up by just 0.1 percent following the 0.3 percent increase in April.

The annual rate of growth in core consumer prices also slowed to 1.2 percent in May from 1.4 percent in April.

"Overall, there is little evidence that the pandemic is resulting in widespread downward pressure on prices and, with the initial impact of the earlier plunge in demand now fading, we doubt core inflation will fall further from here," said Andrew Hunter, Senior U.S. Economist at Capital Economics.

He added, "Nevertheless, with inflation likely to remain well below the Fed's target, that is another reason to expect policy to remain ultra-loose for the foreseeable future."

On Thursday, the Labor Department is scheduled to release a separate report on producer price inflation in the month of May.

Producer prices are expected to inch up by 0.1 percent in May after tumbling by 1.3 percent in April, while core prices are expected to edge down by 0.1 percent after falling by 0.3 percent in the previous month.

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