Consumer Prices Unchanged in May
By The Associated Press -- June 16, 1999
WASHINGTON (AP) -- Consumer prices held
steady in May following an April jump that was the
largest in nearly nine years.
Falling energy prices balanced rising food costs to
help keep the Consumer Price Index flat last month,
the Commerce Department said today.
Core prices -- which exclude the volatile energy and
food categories and are the most closely watched by
economists -- rose a modest 0.1 percent as clothing
and auto prices declined and medical and housing
costs edged up.
So far this year, the annual rate of inflation felt by
consumers is 2.6 percent, compared to a 1.6 percent
rise for all of 1998, the smallest in a dozen years.
The May calm came after consumer prices rose an
unexpectedly sharp 0.7 percent in April. A record
increase in energy prices led that upward swing.
In response, Federal Reserve officials, after a May 18
meeting, issued a warning that if inflation persists,
they are more likely than not to raise interest rates
later this year. That would make credit more
expensive, likely slowing the economy.
The Fed's next meeting is scheduled for June 29-30.
Many economists, however, believe that central bank
officials will wait at least until later in the summer
before deciding whether to take any action on
interest rates.
In other reports today that the Fed may be watching
to gauge the health of the economy:
--Industrial production, which is making a fragile
recovery from a slump in global demand caused by
economic troubles abroad, edged up 0.2 percent in
May, the smallest increase since February.
The Federal Reserve said the modest production gain
at the nation's factories, mines and utilities reflects a
sharp increase in output of automotive products, which
partially offset a large drop in the production of appliances.
--Construction of new housing rebounded in May,
increasing 6.3 percent to a seasonally adjusted
annual rate of 1.676 million units after falling 9.7
percent in April, the Commerce Department said.
Although the April spike in prices was surprisingly
large, it was not totally unexpected and many
analysts have predicted more moderate inflation for
the rest of this year.
Prices are expected to rise as other countries begin to
recover from nearly two years of global financial
turmoil and world demand picks up.
Energy prices dropped 1.3 percent in May after a
record 6.1 percent jump in April. Gasoline prices fell
back 2.7 percent after a 15 percent rise.
The April energy price spike, caused mainly by a
spring agreement by the Organization of Petroleum
Exporting Countries to limit production, had been
expected to be temporary.
Electricity and natural gas prices also declined in
May, although fuel-oil prices continued to edge up
slightly.
Food prices, meanwhile, rose 0.4 percent in May,
building on a 0.1 percent April rise. The cost of fresh
vegetables was up 4.9 percent and fresh fruit prices
rose 1.5 percent. Meat prices rose 0.2 percent
overall, although poultry prices were down 1.2
percent.
Clothing prices fell 0.2 percent in May, with the cost
of footwear down 1.3 percent. Computer prices also
dropped, by 1.9 percent. The apparel and computer
industries continue to be affected by stiff
competition from low-priced imports.
The price of new cars and trucks also fell in May, by
0.1 percent, and public transportation costs dropped
1.5 percent. Airline fares fell 2.5 percent.
The cost of tobacco and smoking products declined
1.4 percent.
Among prices that increased in May: The cost of
housing was up 0.1 percent with rents rising 0.2
percent. And the price of medical care rose 0.2
percent with prescription drug prices climbing 0.4
percent. Drug prices are rising at a 6.1 percent annual
rate so far this year. |
