By Susan A. Baird
PBN Web Editor
WASHINGTON – Consumer prices rose more than expected last month as food and energy prices soared, according to a report today from the U.S. Department of Labor’s Bureau of Labor Statistics.
The nationwide Consumer Price Index for All Urban Consumers (CPI-U) rose a seasonally adjusted 0.6 percent in May, the BLS said. Last month’s gain – the sharpest since November – followed increases of 0.2 percent in April and 0.3 percent in March.
Analysts had expected the CPI-U to rise 0.5 percent in May, based on the median forecast from a Bloomberg News survey of 84 economists. (Their estimates called for gains of 0.2 percent to 0.9 percent.)
The CPI-U’s core index excluding food and energy rose 0.2 percent in May – matching the survey’s projection – after rising 0.1 percent in April and 0.2 percent in March. Higher expenses for transportation (+2 percent), shelter (+0.5 percent), education and communication (+0.4 percent), other goods and services (+0.4 percent, led by tobacco products) and medical care (+0.2 percent) were partially offset by a decline in clothing costs (-0.3 percent).
The food component of the CPI-U rose 0.3 percent last month, slowing from a 0.9-percent rise in April that was the sharpest in 18 years. (READ MORE) The price index for food at home rose 0.3 percent in May after rising 1.5 percent in April and 0.2 percent the month before. Among grocery products, the cereal and bakery products index rose 1.6 percent in its fourth consecutive major advance, but other categories slowed or declined.
The energy index rose 4.4 percent in May after holding steady in April. Gasoline prices resumed their rise, increasing a seasonally adjusted 5.7 percent last month after falling 2 percent the month before. Natural gas prices surged 16.5 percent after rising 4.8 percent the month before; fuel oil prices rose 10 percent after rising 4.4 percent in April; and electricity prices rose 5.8 percent in May.
In the Northeast, the CPI-U rose to 230.089 points (December 1977 = 100) in May, an increase of 0.9 percent from the month before, after rising 0.5 percent in April. Compared with May 2007, the regional index rose 4.3 percent.
The nationwide CPI-U rose 4.2 percent compared with May 2007 – to 216.632 points (1982 to 1984 = 100) – accelerating from year-over-year gains of 3.9 percent in April and 4.0 percent in March.
The core CPI-U rose 2.3 percent year-over-year, the same as in April and March. Energy prices rose 17.4 percent year-over-year, after rising 15.9 percent the month before. Food prices nationwide rose 5.1 percent, matching April’s year-over-year gain.
Meanwhile, the BLS said in a separate report, U.S. production and nonsupervisory workers’ real earnings – average weekly earnings adjusted for inflation – fell last month as average hourly earnings last month (+0.3 percent), but failed to keep pace with the increase in the CPI-U (+0.7 percent). Average weekly hours were unchanged.
Real average weekly earnings fell 0.7 percent in May compared with the month before, after rising 0.1 percent in April and 0.2 percent in March. Compared with May 2007, average weekly earnings rose 3.2 percent – to $601.10 last month from $583.01 a year earlier – but real earnings adjusted for inflation fell 1.2 percent.
“This report isn’t going to relax the Fed,” Nigel Gault, chief U.S. economist at Global Insight Inc. in Lexington, Mass., told Bloomberg News. “More headline price increases are coming.”
Gasoline prices certainly have continued to rise – hitting all-time highs of $4.02 per gallon nationwide $4.079 at Rhode Island stations in this week’s non-seasonally-adjusted AAA fuel-price survey (READ MORE) – while crude oil soared to $139.12 per barrel last week on the New York Mercantile Exchange before retreating slightly.
Commodities prices also continue to increase, although the slow economy appears to be keeping some companies from passing on the full increase to consumers.
U.S. policymakers are paying “close attention” to the problem, Federal Reserve Chairman Ben S. Bernanke told the Fed Bank of Boston’s 53rd Annual Economic Conference this week in Chatham, Mass.
“Inflation has remained high, largely reflecting sharp increases in the prices of globally traded commodities,” Bernanke said. “Thus far, the pass-through of high raw materials costs to the prices of most other products and to domestic labor costs has been limited, in part because of softening domestic demand. However, the continuation of this pattern is not guaranteed ….
“Moreover, the latest round of increases in energy prices has added to the upside risks to inflation and inflation expectations. The Federal Open Market Committee will strongly resist an erosion of longer-term inflation expectations,” he said.
More information, including the full Consumer Price Index report, is available from the U.S. Department of Labor’s Bureau of Labor Statistics at www.bls.gov/cpi; the five-page Real Earnings report can be found at www.bls.gov/ces.
The full text of Ben S. Bernanke’s June 9 speech – “Outstanding Issues in the Analysis of Inflation,” presented at the Federal Reserve Bank of Boston’s 53rd Annual Economic Conference in Chatham, Mass. – is available at www.FederalReserve.gov.
