August 19, 2022

May Consumer Inflation Rose at a Slower Rate

Taken together, the reports reflect the impact of some of the global events that took place in recent months.

“Both of them are reflective of the slowdown in the economy that we have experienced over the last few months,” said Russell Price, a senior economist with Ameriprise Financial.

The Labor Department said in its monthly report that the Consumer Price Index, the most widely used gauge of inflation, was up 0.2 percent in May, compared with 0.4 percent in April, and up 3.6 percent from a year ago before seasonal adjustment.

The monthly rise in the C.P.I. was the lowest since November, when the index was up 0.1 percent, the department’s Bureau of Labor Statistics said.

Analysts had forecast smaller increases: a monthly rise of 0.1 percent in May and a 3.4 percent rise for the 12-month period.

The overall C.P.I. reflected rising food prices, with the food index up 0.4 percent, the same as the previous month. The energy index fell by 1 percent in May, including a 2.0 percent decrease in the gasoline component, making it the first time gasoline has declined since June 2010.

Paul Ballew, a former Federal Reserve economist and now the chief economist at Nationwide, said the C.P.I. data was “not great news” but also “not devastating.” While there are no job or income gains to result from such a modest rise, there is still enough inflation to affect consumers’ pocketbooks, and businesses are faced with costs pressures but no revenue increases, he noted.

“It is not that inflation is roaring ahead, but there are enough price pressures to put a squeeze on consumers and businesses,” he said.

When the traditionally volatile prices for energy and food are stripped out, the core C.P.I. in May recorded its largest increase since July 2008. It was up 0.3 percent in May, compared with 0.2 percent in April, and reached 1.5 percent in the 12-month period, the department said. The monthly indexes for May were above analysts’ forecasts of 0.2 percent and 1.4 percent for the year.

Prices for clothes, shelter and new vehicles contributed to the price acceleration last month, the department said, while there were declines in airline fares, tobacco and personal care items.

In another report released on Wednesday, manufacturers in the New York region reflected less optimism about business conditions. The Empire State Manufacturing Survey, released by the Federal Reserve Bank of New York, indicated that conditions for manufacturers deteriorated in June, as measured by the survey’s general business conditions index, which fell 20 points to minus 7.8 points, dipping below zero for the first time since November 2010.

Mr. Ballew, the former Fed economist, said that the C.P.I. and Fed reports add up to a “flat spot” as the economy recovers.

“We have a fragile economy,” he said. “It is a reflection that we have a long way to go to correct the imbalances that we are all dealing with.”

Analysts had expected a decline in the Empire State index but forecast that it would remain above zero, at 14 points.

In addition, the survey’s future general business index fell compared with its level in May, suggesting that optimism about the next six months has deteriorated. It was down 30 points, to 22.5, its lowest level since early 2009, the survey said.

The new-orders and shipments indexes posted steep declines and fell below zero, the report said. The indexes for number of employees, prices paid and prices received were also lower.

Mr. Price noted that automobile production in the United States declined in April after the March earthquake and tsunami in Japan, contributing to a moderation in business activity. Demand has softened because of the recent spike in gasoline prices.

A third report from the Federal Reserve showed that industrial production rose 0.1 percent in May, after no growth in April because of the Mississippi River flooding and the effects on business related to Japan, analysts said. The report showed a 0.4 percent increase in manufacturing production in May that was mostly offset by a 3.3 percent decline in electric utility production. 

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