The Labor Department said its consumer price index rose 0.7 percent in May following a 0.4 percent increase in the previous month. Economists had been expecting a slightly more modest increase of about 0.6 percent.
The bigger than expected increase marked the fastest pace of consumer price growth since September of 2005, when the impact of Hurricane Katrina drove gasoline prices higher and resulted in a 1.2 percent increase in consumer prices.
A sharp rise in energy prices also contributed to the bigger than expected increase in prices in May, with energy prices surging up 5.4 percent after rising 2.4 percent in April. The increase in energy prices was due in large part to a 10.5 percent increase in gasoline prices.
The increase in energy prices also contributed to a significant increase in transportation prices, which rose 2.8 percent in May following a 1.2 percent increase in April.
With the increase in May, the consumer price index rose at an annual rate of 2.7 percent compared to the 2.6 percent year-over-year growth seen in April.
As mentioned above, however, the report also showed that the core consumer price index, which excludes food and energy prices, edged up only 0.1 percent after rising 0.2 percent in April. Economists had expected the core index to increase by 0.2 percent.
As a result of the slowdown in core consumer price growth compared to the previous month, the core index showed an annual rate of growth of 2.2 percent, its lowest annual reading since March of 2006
Despite the bigger than expected increase by the headline index, the data has further eased recent concerns about the outlook for interest rates, as the Federal Reserve typically seems to focus on core inflation.
On Thursday, a separate report from the Labor Department showed that wholesale prices rose 0.9 percent in May following an unrevised 0.7 percent increase in the previous month. Economists had been expecting the index to increase by a more modest 0.6 percent.
As with consumer prices, the bigger than expected increase in wholesale prices was also largely due to a significant increase in energy prices, which rose 4.1 percent in May after rising 3.4 percent in April.
The Labor Department also said that its core producer price index edged up 0.2 percent in May after coming in unchanged in the two previous months. The modest increase came in line with economist estimates.
Attitudes about inflation have a significant impact on the outlook for interest rates, as the Federal Reserve has said that inflation failing to moderate as expected remains is predominant monetary policy concern.
The Federal Reserve is scheduled to make its next decision on interest rates after a two-day meeting later this month. The Fed is widely expected to leave interest rates unchanged for the eighth consecutive time.
Copyright © 2007 RTTNews.com. All Rights Reserved.
No comments:
Post a Comment