WASHINGTON — The May CPI showed prices remain modest, even though the 0.1% overall gain breaks a string of two months of declining prices.
May CPI was up 0.1%, but core rose 0.2% (0.167% unrounded) for a 1.4% increase in the headline number for the year and a 1.7% gain in the core number over the year. The overall index just missed a higher number that would have met expectations, at plus-0.149%.
Energy posted a 0.4% increase as electric and natural gas (up 2.4% in its fourth consecutive gain) rose; gasoline prices were unchanged. Natural gas is 14.2% higher over the last year, hard to explain given large supplies.
Food prices fell 0.1% with dairy, cereals and bakery products down. The last time food prices declined was September 2009.
In core, rent was up 0.3% and Owners' Equivalent Rent was up 0.2%. These were key and accounted for half of the overall CPI gain. Airfares at plus-2.2% were in a rebound, and apparel and recreation posted 0.2% rises each, also rebounds from last month.
The overall index for medical care was down 0.1%, an unusual move that could be containing inflation. This reflected in part prescription drugs at a 0.6% decline, its biggest drop since November 2006. A Bureau of Labor Statistics economist related this to an unusually large number of key drugs coming off patent.
Used car prices fell 0.1% after increasing for four months.
But a bottom line is this CPI reading represents further modest inflation. Rising gas prices could boost inflation a little ahead. But most of the other components remain well behaved.
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