U.S. Consumer Prices Rise At Fastest Pace In Over A Year

(RTTNews) - Consumer prices in the U.S. rose at their fastest pace in over a year in the month of May, according to a report released by the Labor Department on Tuesday, with the bigger than expected increase reflecting broad-based price growth.

The Labor Department said its consumer price index rose by 0.4 percent in May, the biggest monthly increase since February of 2013.

Economists had expected consumer prices to edge up by about 0.2 percent following the 0.3 percent increase seen in April.

Higher prices for food, shelter, electricity, airline fares, and gasoline all contributed to the bigger than expected increase by the index.

The Labor Department noted that the food index rose by 0.5 percent, reflecting the largest increase since August of 2011. The higher prices for electricity and gasoline also led to a 0.9 percent increase by the energy index.

Excluding food and energy prices, core consumer prices still rose by 0.3 percent in May, which was also the biggest increase since August of 2011.

Core prices had been expected to match the 0.2 percent growth seen in each of the two previous months.

Along with the prices for shelter and airline fares, the medical care, apparel, and new vehicle indexes all increased in May.

With the continued increase in prices, the annual rate of consumer price growth accelerated to 2.1 percent in May from 2.0 percent in April, representing the biggest increase since of October of 2012.

The annual rate of core consumer price growth also climbed to 2.0 percent in May from 1.8 percent in the previous month.

Peter Boockvar, managing director at the Lindsey Group, said, "While the Fed wants to look at the PCE measure of inflation, the CPI for the 2nd straight month is at their target level and the upward trend may not just stop here."

"The relevance of course, outside for those whose wages are rising only in line with CPI (average hourly earnings in May were also up 2.1%), is whether the Fed can really wait until the middle of 2015 before raising interest rates," he added.

Last Friday, the Labor Department released a separate report showing an unexpected drop in producer prices in the month of May.

The producer price index for final demand dipped 0.2 percent in May after climbing by 0.6 percent in April. Economists had expected prices to inch up by 0.1 percent.

The unexpected drop in producer prices was mainly attributed to a pullback in prices for trade services, which fell by 0.5 percent in May after surging up by 1.4 percent in each of the two previous months.

The Labor Department noted that the trade indexes measure changes in margins received by wholesalers and retailers.

The report also showed modest decreases in prices for food and energy, which both edged down by 0.2 percent. The drop in food prices came on the heels of a 2.7 percent jump in the previous month.

Excluding food and energy prices, core producer prices edged down by 0.1 percent in May following a 0.5 percent increase in April. Economists had expected core prices to tick up by 0.1 percent.

Compared to the same month a year ago, producer prices rose by 2.0 percent in May, reflecting a modest slowdown compared to the 2.1 percent growth seen in April.

Core producer prices increased at an annual rate of 2.0 percent in May compared to the 1.9 percent growth seen in April.