Core Consumer Price Growth Hits 9 Year Low Despite Soaring Food & Booze Costs

After plunging in April, economists expected the deflationary impulse in consumer prices to stabilize in May and it did with headline and core CPI both falling just 0.1% MoM (exp was 0.0%).

This sent headline CPI growth lower (to just +0.1% YoY) and core CPI grew at +1.2% YoY - the slowest since 2011.

Source: Bloomberg

Lots of deflationary prints in the Energy and Autos sector but food surged...

Goods are suffering the worst deflation since 2004 and services costs are growing at the slowest pace since 2011...

The energy index fell 18.9 percent over the past 12 months as all of the major energy component indexes declined. The gasoline index decreased 33.8 percent, while the fuel oil index fell 37.5 percent. The index for electricity fell 0.2 percent over the last year, while the index for natural gas declined 0.3 percent.

The index for all items less food and energy decreased 0.1 percent in May. The index for motor vehicle insurance continued to decline, falling 8.9 percent in May after a 7.2-percent decrease in April. The apparel index also continued to decline, falling 2.3 percent in May after decreasing 4.7 percent the prior month.

The index for airline fares fell 4.9 percent in May, and the index for used cars and trucks declined 0.4 percent, the same decrease as in April.

The food at home index increased 4.8 percent over the last 12 months, with all six major grocery store food group indexes rising over that span.

The index for meats, poultry, fish, and eggs rose 10.0 percent over the last year, its largest 12-month increase since the period ending May 2004.

This reflects a sharp increase in the beef index, which rose 18.2 percent over the span. The index for dairy and related products increased 5.7 percent, and the index for nonalcoholic beverages rose 4.1 percent over the year. The remaining groups posted smaller increases. The index for food away from home rose 2.9 percent over the last year. The index for limited service meals increased 3.6 percent and the index for full service meals rose 2.4 percent over the last 12 months.

Additionally, the index for alcoholic beverages increased 0.8 percent in May, its largest increase since January 2012.

The shelter index rose 0.2 percent in May. The indexes for rent and for owners’ equivalent rent both increased 0.3 percent in May after rising 0.2 percent in April. The index for lodging away from home continued to decline, falling 1.5 percent in May.

Of course, this somewhat disinflationary print provides further greenlighting for The Fed to stay the course (or ease even more).