Wholesale prices blip up 0.1% in May

Cornelia Mascio
Giugno 12, 2019

The latest confirmation of the absence of inflation should comfort markets hoping the Federal Reserve will cut interest rates in the coming months to boost the economy, especially amid President Donald Trump's multi-front trade wars. Mr. Trump has blamed the policies for harming the economy, and placing the U.S.at a competitive disadvantage to other countries.

Below-forecast inflation follows signs of slower economic growth in the US that would only bolster investor expectations for Fed rate cuts this year.

"We are closely monitoring the implications of these developments for the United States economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labour market and inflation near our symmetric two percent objective".

The Fed chairman's comments come a day after St. Louis Federal Reserve President James Bullard said in a speech that a rate cut may be needed "soon". Goods prices slipped 0.2% last month after gaining 0.3% in April. That core price gauge - linked to spending and excluding food and energy - firmed in April for the first time this year, though remained below the Fed's two-per-cent target. In the 12 months through May, the so-called core CPI rose 2.0% after advancing 2.1% in April. Stocks on Wall Street were trading higher.

The Fed's preferred inflation measure, the core personal consumption expenditures (PCE) price index, increased 1.6 percent in the year to April after gaining 1.5% in March. Data for May will be released later this month.

The Fed raised rates four times past year, with the last hike in December putting the federal funds rate in the 2 ¼ to 2 ½% range. Energy prices fell 0.6 per cent from the prior month and 0.5 per cent from a year earlier as all major components in the category fell on an annual basis. Retail sales were down by 0.2% m/m in April but are forecast to have rebounded by 0.6% in May. Food consumed at home increased 0.3%.

Healthcare costs increased 0.3%, matching April's rise. According to a Reuters survey of economists, core consumer prices probably increased 0.2 percent last month after nudging up 0.1 percent in April.

The cost of hospital services increased 0.5 per cent in May and the cost of doctor visits ticked up 0.1 per cent. But the prices for prescription medication fell 0.2 per cent. They had declined for two months in a row after the government introduced a new method and data to calculate apparel prices.

The index for used cars and trucks slumped 1.4% in May, the fourth straight decline. That was the largest drop since last September and marked the fourth straight monthly decrease. The cost of motor vehicle insurance fell 0.4 per cent, the most since May 2007. There were also decreases in the cost of recreation.

Prices medical care, air fares, education, furniture and new autos all rose.

In a separate tweet, Mr. Trump said: "The United States has VERY LOW INFLATION, a lovely thing!"

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