WASHINGTON – Consumer inflation rose in May, largely reflecting a big jump in gasoline and electricity costs. Prices for most goods other than energy products were well-controlled.
The Labor Department reported Friday that that its Consumer Price Index, the government's most closely watched inflation gauge, climbed by a seasonally adjusted 0.4 percent last month, following a 0.3 percent increase in April.
The latest reading on consumer prices matched analysts' expectations.
The "core" rate of inflation, which excludes volatile energy and food prices, inched up a tiny 0.1 percent in May, compared with a 0.2 percent rise the month before. The core performance was better than what many analysts were predicting and marked the best showing in five months.
With inflation well-contained, the Federal Reserve has been able to act aggressively to stave off recession, slashing interest rates five times this year and driving down borrowing costs to the lowest point in seven years.
Economists predict Fed Chairman Alan Greenspan and his colleagues will cut rates a sixth time at their next meeting June 26-27, by either one-quarter or one-half percentage point. Some say that could be the last reduction in the Fed's latest credit-easing campaign.
While economists are keeping their eye on inflation creep, many project that higher prices for energy are more likely to take a bite out of companies' profits than be passed along to consumers in the form of higher prices — a difficult undertaking when the economy is weak.
The reading on consumer inflation comes a day after the government reported that prices at the wholesale level inched up by just 0.1 percent in May.
During the first five months of this year, consumer prices were rising at an annual rate of 4 percent, compared with 3.4 percent for all of 2000. The pickup largely reflects soaring energy costs, which have increased at an annual rate of 16.3 percent this year.
In May, all energy prices shot up by 3.1 percent, following a 1.8 percent increase the month before. That marked the largest gain since January.
Gasoline prices led the way, increasing 6 percent in May, the biggest leap in eight months. Electricity costs jumped 1.3 percent, the largest increase since January. Fuel oil costs rose 0.5 percent.
Gasoline prices during a seven-week period ending in mid-May soared by a whopping 31-cent-a-gallon average nationwide and 43 cents in the Midwest, according to the Energy Department's Energy Information Administration.
During the past month, prices declined by 7 cents on average nationwide, but could rebound if there are supply or refinery problems, the administration said.
Higher energy prices helped to lift costs for transportation, which rose 1.2 percent in May. Airfares were up 0.8 percent.
Food prices increased 0.3 percent, following a slim 0.1 percent gain in April. Rising prices for pork, beef and dairy products outweighed falling prices for poultry, fruits and vegetables.
Clothing prices fell 0.9 percent as retailers discounted merchandise to lure shoppers into stores. Car prices edged down 0.1 percent and prices for tobacco products fell 1.3 percent, the biggest drop since December.