(Bloomberg) — US consumers, unaccustomed to falling prices for the past several years, were able to breathe a little bit easier last month as many necessities — from groceries to gasoline to car insurance — became cheaper.
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Even many discretionary goods and services either showed slower price growth or actual declines in May from the prior month, the Bureau of Labor Statistics’ consumer price index showed Wednesday.
The CPI, a broad gauge of inflation, was unchanged, the tamest since the summer of 2022. The core measure, which excludes food and fuel for a better snapshot of underlying price pressures, rose a less-than-projected 0.2% — a welcome break after a series of larger advances this year.
The figures may represent the early stages of inflation resuming a downward trend. But Federal Reserve policymakers have stressed that they’d need to see several months of price pressures receding before they consider lowering interest rates.
Inflation-weary consumers will need more of the same as many are still strapped by prices that are 20% higher than they were at the end of 2020. That explains both lukewarm consumer sentiment about the economy and poor approval ratings for President Joe Biden.
Still, the price declines in several service categories, including those related to travel as well as car insurance, are encouraging for the inflation outlook, Wells Fargo & Co. economists Sarah House and Michael Pugliese said in a note. “We view this as a sign that the more benign environment for goods inflation over the past year is finally feeding into services,” they said.
“We see inflation pressures continuing to subside amid a cooling jobs market, an increasingly stretched consumer and smoother-functioning supply chains, which should drive the monthly pace of inflation lower as the year progresses,” the group said.
The supermarket is one of the first places of price relief for the consumer. The CPI report showed grocery prices were unchanged in May and haven’t increased since January. The cost of beef, milk, butter, eggs, seafood and vegetables dropped last month. Even baby food and formula prices fell the most in nearly a year.
Getting there was cheaper as well. Gasoline prices slid 3.6%, the most since November. Drivers also enjoyed the first decline in motor vehicle insurance costs since 2021, though they’re still up a whopping 20% from a year ago.
Energy costs were tame at home, too, with no change in electricity prices and a decline in natural gas in the month.
The CPI report also showed some relief in discretionary categories. Admissions to movies, theaters and concerts dropped from a month earlier by the most since September 2022. Airfares posted the sharpest decline since July and the cost of hotel stays fell for a second month.
“This report builds the case that inflation has resumed its downward path after an unanticipated surge in the first quarter,” Scott Anderson, chief US economist at BMO Capital Markets, said in a note.
–With assistance from Daniel Neligh.
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