Wednesday June 17, 03:07 PM
US consumer prices edge up in May
By Veronica Smith
WASHINGTON (AFP) - US consumer prices edged slightly higher in May after holding steady in April, government data showed Wednesday in a report underscoring weak demand amid the prolonged recession.
The Labor Department said its consumer price index (CPI (NYSE: CPY - news) ) rose a modest 0.1 percent from April, according to seasonally adjusted data. The price rise was less than most analysts' expectations of a 0.3 percent gain.
Overall CPI was unchanged in April after slipping 0.1 percent in March.
"Although CPI inflation remains positive, May's numbers indicate that the danger of deflation is still present," said Andres Carbacho-Burgos Moody's Economy.com.
On a 12-month basis, CPI fell for the third straight month in May, by an unadjusted 1.3 percent, the sharpest annual drop in consumer prices since April 1950.
However, in May 2008 consumer prices were surging on the back of a rally in oil and other commodity prices that was followed by a sharp correction in the second half of the year.
Core (Berlin: LJ1.BE - news) consumer prices, excluding food and energy, also increased 0.1 percent in May, in line with expectations, after gaining 0.3 percent in April.
Core inflation climbed an unadjusted 1.8 percent from May 2008, a rate within the economic comfort zone of US monetary authorities.
Energy prices, led by gasoline, returned as a main driver of consumer inflation, rising 0.2 percent, after falling for two months running, by 2.4 percent in April and 3.0 percent in March.
Energy prices were 27.3 percent lower than a year ago.
Consumers faced sticker shock at the gasoline pump, where prices soared 3.1 percent from the prior month, offsetting lower prices for electricity, heating fuel and natural gas.
Food prices fell for the fourth straight month, by 0.2 percent, the same decline as in April, but were up 2.7 percent from a year ago.
The Labor Department noted steep drops in fruit and vegetable prices, down 1.0 percent, and a 0.9 percent decline in meat, fish and egg prices.
Excluding energy and food, price changes were mixed, with gains of 0.8 percent in transportation, 0.5 percent in new autos and 0.3 percent in medical care.
Prices dropped 0.3 percent for tobacco, which had been higher in prior months under increased federal taxes. Clothing prices fell 0.2 percent and housing was down 0.1 percent.
"We expect headline inflation to keep on falling in the months ahead despite the recent rise in gasoline prices as a result of a strong base effect," said Marie-Pierre Ripert, US economist at Natixis (Paris: FR0000120685 - news) .
"We are still convinced that the significant slack in the economy will weigh on core consumer prices in the month ahead."
Ripert forecast that core inflation would fall below 1.0 percent in early 2010 and would continue to decrease in 2010.
"We don?t believe in the inflationary risk and are still convinced that monetary policy has to remain expansionary for a long time," she added.
The Federal Reserve has indicated it would continue to hold its base interest rate at virtually zero in a bid to wrest the economy from recession that began in December 2007. The Federal Open Market Committee, headed by chairman Ben Bernanke, will hold its next policysetting meeting on June 23-24.
|
|
|
Send Article by Email
Send Article by IM
Blog This with Y! 360
Printable View
