• The food price increases were driven by meat, poultry, fish and eggs, with the price of beef up 10.8% from April
  • Gasoline prices in May were 3.5% lower than in April
  • Experts say they think falling prices have bottomed out and the U.S. won't slip into deflation

Inflation fell for the third straight month in May, off 0.1% as prices for motor vehicle insurance, energy and clothing offset gains in food and shelter, the Bureau of Labor Statistics reported Wednesday. In the last year, the Consumer Price Index has increased just 0.1%, well below the 2% target set by the Federal Reserve Bank but missing a slide into deflation.

In April, the CPI saw its steepest drop since the end of 2008 as the coronavirus pandemic shut down the economy.

“Consumer prices just missed tipping over into deflation, and with economic demand strengthening in June as the pandemic shutdown lifts throughout the country, it looks like the downward spiral in prices has ended,” Chris Rupkey, chief financial economist at MUFG, told Barron’s.

Gasoline prices dropped 3.5% as the global oil glut depressed prices, leading to a 1.8% decline in the energy index. Prices for food at home rose 1% as people hunkered down as a result of the pandemic, sending the overall food index up 0.7%.

Without considering food and energy prices, inflation was off 0.1%, the third straight month of decline and the first time a three-straight-month decline has been registered. Indexes for airline fares, and used cars and trucks also declined while indexes for shelter, recreation, medical care, household furnishings and operations, and new vehicles all were higher.

“We’re seeing a very rapid decline in core inflation and that is reflective of the major demand shock that we’re going through because of the coronavirus,” Gregory Daco, chief U.S. economist at Oxford Economics, told Bloomberg. “We’ve reached probably the peak disinflationary impulse in the monthly numbers, but we may see actual realized inflation -- the year-over-year declines -- continue over the next few months as they deteriorate.”

For the last 12 months, excluding food and energy, inflation was up 1.2%, compared to 2.4% for the 12-month tally that ended in February. The energy index is off 18.9% from last year while the food index is up 4% and the food-at-home index is up 4.8%.

The increase in food prices was driven by increases for meat, poultry, fish and eggs, with beef up 10.8% from April. Prices for dairy, fruits and vegetables, and beverages also were up while cereals and bakery products were down.