Consumer Prices Dropped In May

Most of it came in savings at the gas pump

The U.S. Labor Department reports the Consumer Price Index (CPI), a measure of what consumers pay for goods and services, tumbled in May, but the savings came mainly in one area – the gas pump.

The CPI was down 0.3 percent in May, the first decline in two years. But the decline can be attributed to a 6.8 percent drop in gasoline prices during the month. But when you exclude food and energy prices, the CPI's “core rate” actually rose 0.2 percent last month.

Medical services expenses were up and so was the cost of used vehicles. Clothing costs also rose last month. So did train and airline tickets. College education and cable TV expenses also posted hefty gains in May.

“The so-called core index, which excludes food and energy, continues to rise at a pace that is higher than most on the Fed would like to see,” said economist Joel Naroff, of Naroff Economic Advisos, in Holland, Pa.

Naroff says, at the moment, inflation isn't really an issue for consumers, economic growth is. To that extent, he says the big drop in gasoline prices over the last month helps, since it puts more money in consumers' pockets.

Consumers also earned more money last month. The Labor Department report shows the average worker gained 0.1 percent in hourly wages, increasing average earnings by 0.3 percent.

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