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US May CPI Slips Before June Demand Pickup

US consumer prices were below the flat reading expected, as energy prices declined further, but demand is likely to rebound in June and lift prices along with it.

Data released by the Labor Department Wednesday morning showed that overall CPI fell by 0.1%, as did core CPI which excludes both food and energy prices. Both were expected to hold steady in the month after sharp declines in April.

The Bureau of Labor Statistics again noted issues with data collection due to the need to social distance and reported that they were unable to calculate some index series as a result.

Energy prices fell by 1.8%, with gasoline prices down 3.5% as drivers stayed off the roads compared to the same month in previous years. Seasonal adjustment factors expect demand for gasoline to rise substantially in May, lifting unadjusted prices. However, unadjusted energy prices were flat, with unadjusted gasoline prices down 0.2% in these abnormal times.

Food prices rose 0.7% in the month, with food at home prices up 1.0% and food away from home up 0.4%. As restaurant business picks up in June, prices of eating out could see an uptick.

Within the core, the relatively large owners’ equivalent rent category rose by 0.3%, but lodging away from home prices fell by 1.5% due to continued travel restrictions. Airline fares fell by 4.9% and were down 28.8% year/year.

Prices of household cleaning supplies and paper products rose further, but the gains were smaller than in recent months as shortages were less frequent.

However, apparel prices fell by 2.3% as social distancing continued, making in-personal purchases difficult. The reopening of retail establishments in June should allow pent-up demand to lift prices of these items.

Through May, overall CPI prices were up 0.1% from their year ago level, slower than the 0.3% rate in April. Prices excluding food and energy were up 1.2% year/year, down from the 1.4% gain in the previous month.

Kevin Kastner

Julie Ros

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