RTTNews - Consumer prices showed a modest increase in the month of May, according to a report released by the Labor Department on Wednesday, with the mild price growth coming in below the expectations of economists.
The report showed that consumer prices edged up 0.1 percent in May after coming in unchanged in April. Economists had been expecting a somewhat more substantial increase in prices of about 0.3 percent.
While consumer prices showed a modest monthly increase, they were down 1.3 percent compared to the same month a year ago. This marks the steepest annual rate of decline since April of 1950.
Chris Low, chief economist at FTN Financial, said, Despite recent commodity price increases, consumer inflation continues to reflect weak demand and competition to maintain market share.
The modest monthly increase in consumer prices was partly due to a notable increase in transportation costs, which rose 0.8 percent in May after falling 0.4 percent in April. A 3.1 percent increase in gasoline prices contributed to the rebound.
At the same time, the report showed that energy prices edged up only 0.2 percent, as the increase in gasoline prices was partly offset by declines in other energy prices.
Core consumer prices, which exclude food and energy prices, edged up 0.1 percent in May following a 0.3 percent increase in April. The modest increase in core prices came in line with economist estimates.
On an annual basis, core prices were up 1.8 percent compared to the same month a year ago, reflecting a slowdown from the 1.9 percent annual rate of growth reported for April.
The report also showed that owners' equivalent rent, which represents 24 percent of the overall consumer price index, rose 0.1 percent in May.
Peter Boockvar, equity strategist at Miller Tabak said, This component has been a source of debate on where the CPI goes from here as some believe the decline in home purchases and drop in the home ownership rate will boost rents.
On the flip side some think many homes for sale will in turn be rented and thus will keep a lid on rents, he added.
The Labor Department released a separate report on Tuesday showing a smaller than expected increase in wholesale prices in the month of May, with a notable decline in food prices nearly offsetting a jump in energy prices.
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