U.S CPI Decreased by 0.3% in May – June Report

The Bureau of Labor Statistics published today the recent report of the U.S CPI for May 2012. According to the publication the consumer price index fell by 0.3% and in annual terms the US CPI increased by 1.7%. The consumer price index sans food and energy rose by 0.2% during May and 2.3% in the last 12 months.   

The prime reason for decline in the U.S.consumer price index was related to the sharp drop in energy prices: the energy index tumbled down by 4.3% (M-2-M) during May; in annual terms the energy index fell by 3.9%; among the energy products, the fuel oil led the drop with a 6.8% decrease during the month. Furthermore, the food index remained unchanged during May and rose by 2.8% in annual terms.

The core U.S inflation (CPI sans energy and food) edged up again by 0.2% during May and by 2.3% during the past 12 months. These figures coincide with the recent U.S PPI report, in which the core PPI also rose by 0.2% during May.

In the previous month the April 2012 CPI remained unchanged and the core CPI increased by 0.2% (M-2-M).

The chart below presents the development of the (M-O-M) percent changes of the U.S. CPI during 2011-2012.

U.S. inflation May 2012 Rate (percent) June 15 2012

The drop in energy is likely to also pull down the U.S CPI during the June report. But since the core CPI continues to increase very steadily it could mean the U.S economic activity isn’t slowing down.

This news doesn’t seem to have much of an effect on the direction of the U.S dollar against other currencies, despite the sharp drop in the U.S inflation. It may rekindle the speculation of another intervention by the Fed to stimulate the economy.

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