Consumer prices surge 0.7% in May

PBN Staff

06/15/2007

WASHINGTON – The seasonally adjusted Consumer Price Index for All Urban Consumers (CPI-U) last month rose 0.7 percent, its fastest rate in nearly two years and nearly double its 0.4-percent April gain, according to a report today from the U.S. Bureau of Labor Statistics.
The increase exceeded the 0.6-percent median forecast of 79 economists surveyed by Bloomberg News. Their estimates ranged from 0.3 percent to 1 percent.
The gain was led by energy prices, which increased sharply for the third straight month. The energy index rose 5.4 percent in May, 2.4 percent in April and 5.9 percent in March. Prices for petroleum-based energy rose 9.8 percent in May, the BLS said, while energy services declined 0.2 percent.
But the Federal Reserve’s preferred measure – the core CPI, excluding food and energy – edged up 0.1 percent, easing inflation fears. The BLS cited slower increases in shelter and medical costs.
Analysts had expected the core price increase to match April’s 0.2-percent rise, Bloomberg said.
Compared with May 2006, the CPI rose 2.7 percent, accelerating from April’s year-over-year gain of 2.6 percent. Core prices increased 2.2 percent compared with a year earlier, slowing from April’s 2.3-percent rise, in their smallest 12-month gain since March 2006.
“In terms of the Fed, this is great news,” Lindsey Piegza, an analyst at FTN Financial in New York, which correctly forecast the increase in core prices, told Bloomberg News. “Some of the price increases are being passed on to consumers, but the majority are being taken on by producers.”
Meanwhile, American workers’ real average weekly earnings fell 0.2 percent in May, slowing from April’s 0.6 percent decline, the BLS said in a separate report, as the month’s 0.3-percent increases in both average weekly hours and average hourly earnings were more than offset by the 0.8 percent increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
Compared with May 2006, real earnings (adjusted for inflation) increased 4.1 percent. Before adjustment for seasonal changes and inflation, weekly earnings averaged $583.73 in May compared with $560.09 a year earlier.

Additional information, including the 19-page 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.

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