Latest News

National News

Ahead of the Bell: US Consumer Prices

WASHINGTON (AP) - A measure of U.S. consumer prices likely ticked up in May after two months of declines caused by lower gas prices. The small increase would add to evidence that inflation remains tame.

Economists forecast that the consumer price index increased a seasonally adjusted 0.2 percent last month from April, according to a survey by FactSet. Small increases in the cost of gas, food and rent likely pushed the index higher.

The Labor Department will release the May report at 8:30 a.m. EDT Tuesday.

Consumer prices fell 0.4 percent in April _ the largest monthly decline in four years _ and 0.2 percent in March. Both declines were mostly because gas prices plummeted during those months.

Overall prices have risen just 1.5 percent in the 12 months that ended in April.

Excluding volatile food and gas costs, core prices increased 0.1 percent in both April and March. And core prices have risen just 1.9 percent in the 12 months that ended in April, in line with the Federal Reserve's inflation target of 2 percent.

Tame inflation makes it easier for the Fed to continue its extraordinary efforts to boost economic growth. It has also allowed consumers to increase spending this year, despite weak wage gains and higher Social Security taxes.

Retail sales rose at a healthy clip in May from April, the Commerce Department said last week. Americans spent more on cars and trucks, home improvements and sporting goods.

Wholesale prices rose 0.5 percent in May, as gas and food costs increased, the Labor Department said last week. But in the past year they have risen just 1.7 percent.

Fed policymakers will meet Tuesday and Wednesday to discuss the economy's health and consider their next moves.

Steady job gains and resilient consumer spending have fueled intense speculation that the Fed may soon start reducing the pace of its monthly bond purchases. That's caused heavy volatility in stock and bond prices.

The Fed is purchasing $85 billion a month in bonds to keep longer-term interest rates down. That's intended to encourage more borrowing, investing and spending. The Fed says it will continue to buy bonds until the job market improves substantially.

The Fed also says it plans to keep the short-term interest rate it controls at a record low near zero until the unemployment rate falls below 6.5 percent, provided inflation remains under control. The unemployment rate ticked up in May to 7.6 percent, though it is down 0.6 percentage points in the past year.

(Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)


comments powered by Disqus
Latest News