U.S. consumer prices dropped 0.1 percent in May, following a 0.8 percent fall seen in April. Therefore, inflation is barely in positive territory, up only 0.1 percent on a year-on-year basis. Energy prices continued to fall in May, dropping 1.8 percent on the month, and 18.9 percent year-on-year.
Nevertheless, lower energy prices were essentially countered by a 0.7 percent rise in food prices in May. Food prices rose 4 percent year-on-year, the most rapid pace since January 2012. Food inflation was widespread in April, but in May was mainly driven higher by prices for meats, poultry, fish and eggs, and the largest surge in beef prices ever, up 10.8 percent on the month.
With food and energy prices balancing out, core prices matched the headline, falling 0.1 percent in May after a 0.4 percent fall in April. This is the first time ever that core prices have fallen for three straight month. Therefore, core inflation was only 1.2 percent year-on-year in May.
Prices continued to decline sharply for motor vehicle insurance, apparel and airline fares. These falls were partially countered by price rises for housing, recreation, medical care, housing furnishings and operations, new vehicles and alcoholic beverages.
The Bureau of Labor Statistics noted considerable disruption in the typical data collection process due to COVID-19.
“May's CPI data tells the story of life under stay-at-home orders. Prices are up sharply for things consumers can do at home – eat, drink and enjoy new furniture. And prices are down for what people aren't doing – going on trips, driving to work, and getting dressed up to go places”, said TD Economics in a research report.
