WASHINGTON – Consumer prices surged in May at the fastest pace in 20 months, fueled by another big rise for gasoline, as well as an increase for food.
Inflation was docile in other areas, with prices for computers, clothes, cars and airline tickets all falling.
The Consumer Price Index posted an increase of 0.7 percent, the biggest one-month gain since the fall of 2005, when energy prices surged after Hurricane Katrina shut down Gulf Coast oil production. Excluding energy and food, the increase for so-called core inflation was just 0.1 percent.
Wall Street chose to focus on the lower-than-expected core reading, believing the Federal Reserve will be happy such pressures are beginning to ease and will leave interest rates alone at its meetings for the rest of the year.
But the big increases in energy and food still meant consumers were falling behind in the cost-of-living struggle. The government said in a separate report that weekly earnings for nonsupervisory workers, after adjusting for inflation, fell by 0.2 percent last month. That was the fourth decline in the past five months, reflecting the bite inflation is taking out of paychecks.
“While financial markets love the fact that underlying inflation is tame, if you are an average American and see your food costs rising rapidly and gasoline above $3 per gallon, then inflation doesn’t seem so low,” said Mark Zandi, chief economist at Moody’s Economy.com.
So far this year, consumer prices have been rising at an annual rate of 5.5 percent, compared with 2.5 percent for all of 2006. The acceleration has occurred because of the increase in energy and food costs caused in part by higher demand for ethanol, which is produced with corn.
In May, energy prices rose by 5.4 percent, driven by a 10.5 percent jump in gasoline pump prices. The surge in gasoline costs appeared to be moderating in recent weeks.
Food costs were up 0.3 percent in May. Vegetable prices fell, but beef, poultry and fresh fruit prices were up.
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