WASHINGTON (MaceNews) – May’s U.S. CPI report Wednesday had no surprises, with an as-expected 0.1% increase both overall – for a 1.8% over-the-year consumer inflation rate – and for the core rate, with a deceleration in the category with the single biggest weighting, shelter.
The annualized rate for core items, other than food and energy, was 2.0% through May.
Since the Federal Reserve pegs its inflation target of 2.0% on a different measure, for personal consumption expenditures which is now around 1.6%, the performance of consumer inflation is in the central bank’s view, suboptimum. Inflation expectations according to survey methodology also appears to remain below target by a little more than a quarter point. The latest CPI report did not contain any hints the overall moderate inflation picture is changing.
The shelter category makes up 33.2% of the entire Consumer Price Index, by far the heaviest single weighting and the main difference with the PCE which lacks the dominance of housing. So May’s rare deceleration in the CPI shelter index, to a 0.2% increase after two months of 0.4%, was notable.
Food and energy, which make up 21% of the CPI, are the most volatile prices and their absence from the core rate makes it a better indicator of underlying inflation. Food bounced up to a 0.3% increase in May after falling a tenth in April. Energy dropped 0.6% in May after having risen 2.9% in April and 3.5% in March. Gasoline alone was off half a point after rising 5.7% in April and 6.5% in March.
Commodities less food and energy kept up its string of minuses, falling a tenth in May. Services, less energy, was up 0.2%, continuing its upward push on the index.
Among core items, among the biggest movers was used car prices, down for the fourth month, this time by a lot,1.4%. Vehicle insurance was down 0.4%, the biggest decline in that category since spring of 2007.
Medical care rose 0.3% for the third month, with hospital services up and prescription drugs down 0.2%. Doctors’ service were up a tenth.
The indexes for airline fares, for household furnishings and operations, and for new vehicles also increased over the month. The index for apparel was unchanged in May following two monthly declines.
Tuesday’s report on business inflation, the Producer Price Index, was up just 0.1% in May, an annualized rate of 1.8%. Its core rate annualized was up 2.3% through May. All numbers were adjusted to compensate for recurring seasonal patterns.