Consumer Prices Drop for a Third Month

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In May, the CPI and the “core” CPI fell for the third straight month amid the current recession caused by the COVID-19 pandemic. The data are a reminder that deflation is a greater risk during an economic downturn. However, as the economy rebounds, those deflationary pressures will ease.

The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) declined by 0.1% in May on a seasonally adjusted basis, following a decline of 0.8% in April. Excluding the volatile food and energy components, the “core” CPI declined by 0.1% in May, after a drop of 0.4% in April. It was the first time that the “core” CPI has declined for three consecutive months in the history of the data series back to 1957. In May, while the indexes for used cars and trucks (-0.4%), apparel (-2.3%), airline fares (-4.9%) and motor vehicle insurance (-8.9%) decreased, the indexes for shelter (0.2%), recreation (0.9%), medical care (0.5%), household furnishings and operations (0.4%), and new vehicles (0.3%) all increased.

Meanwhile, the price index for a broad set of energy sources dropped by 1.8% in May, following a 10.1% drop in April. It marks the fifth consecutive month of declines. The gasoline index and the fuel oil index, the major components of energy commodities, declined by 3.5% and 6.3% over the month. In the category of energy services, the electricity index slipped by 0.8% while the index for utility gas service rose by 0.8%. The continued decreases in the “core” CPI and energy prices reflected broader deflationary pressure.

The food index increased by 0.7%, slower than a 1.5% increase in April. The indexes for food at home and food away from home continued to rise amid the COVID-19 pandemic.

BLS data collection in May continued to be affected by the COVID-19 pandemic. BLS mentioned in the today’s news release that many indexes are based on smaller amounts of collected prices than usual, and a small number of indexes that are normally published were not published in May.

Over the past twelve months, on a not seasonally adjusted basis, the CPI rose by 0.1% in May, following a 0.3% increase in April. Meanwhile, the “core” CPI increased by 1.2% over the past twelve months, slower than a 1.4% increase in April. The food index rose by 4.0%, and the energy index declined by 18.9% over the past twelve months.



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