CPI inflation in May turned negative on continued significantly lower energy costs. Meanwhile, the core rate held steady and moderately warm. The consumer price index fell 0.3 percent in May, following no change the month before. The consensus forecast was for a 0.2 percent decline. Excluding food and energy, the CPI gained 0.2 percent, compared to 0.2 percent in April. Analysts projected a 0.2 percent rise.
By major components, energy dropped a monthly 4.3 percent after falling 1.7 percent the prior month. Gasoline declined a sharp 6.8 percent, following a drop of 2.6 percent in April. Food prices were unchanged in May, following a 0.2 percent gain in April.
Within the core, 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 indexes for household furnishings and operations and for tobacco declined.
Year-on-year, overall CPI inflation eased to 1.7 percent from 2.3 percent in April (seasonally adjusted). The core rate remained at 2.3 percent on a year-ago basis. On an unadjusted year-ago basis, the overall figure was up 1.7 percent in May, compared to 2.3 percent in April while the core was up 2.3 percent, matching April's rate, not seasonally adjusted.
The obvious good news from today's CPI report is that consumers are paying less at the gas pump, freeing up some money to spend elsewhere. Yesterday's 0.2 percent decline in May retail sales turns slightly positive in real terms with the CPI dropping 0.3 percent. But within the Fed, there likely will be diverging opinions on inflation. Headline numbers are favorable but the core is stubbornly on the warm side.
Market Consensus before announcement
The consumer price index posted at unchanged in April after a 0.3 percent boost the prior month. Excluding food and energy, the CPI rose 0.2 percent, matching the March pace. By major components, energy fell 1.7 percent after jumping 0.9 percent in March. Gasoline dropped 2.6 percent, following a 1.7 percent rise the prior month. Food price inflation held steady at 0.2 percent. Within the core, apparel prices posted a notable gain while recreation declined. New and used vehicles saw notable increases in prices.