US consumer prices dip 0.1 percent in May

The Consumer Price Index (CPI) based inflation strengthened the finance ministry's stand that Reserve Bank of India's forecast on price rise had large errors and there was a case for cutting interest rate to help private investments to pick and boost economic growth.

United States consumer prices fell 0.1% for May compared with consensus forecasts of prices being unchanged on the month while the year-on-year inflation rate declined to 1.9% from 2.2% previously and compared with an expected rate of 2.0%. On Wednesday, June 14, 2017, the Labor Department reports on US consumer prices for May. "It won't stop the Fed from hiking interest rates later today, but it increases the downside risks to our forecast that there will be a further two rate hikes in the second half of this year", said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

He said the inflation slowdown was occurring at the same time that the unemployment rate has fallen to a 16-year low.

American consumers forked out a total of US$473.8 billion (RM2 trillion) for the month, 3.8 per cent above May of a year ago.

And gasoline stations saw sales drop 2.4 percent, the biggest decline since February of past year.

Nevertheless, James Bohnaker of IHS Markit said seasonal factors likely exaggerated the effect of falling energy prices on overall inflation because gasoline prices typically rise in the spring, ahead of the United States driving season.

Food index rose 0.2 percent in May, the same growth as in April, while the energy index fell 2.7 percent in the month, after rising 1.1 percent in April.

According to the CSO data, manufacturing sector, which constitutes 77.63 per cent to the IIP, grew at 2.6 per cent in April compared to 5.5 per cent in same month past year. The loonie was on pace for its best week since January 2016, up 2.5 percent since Friday. In addition to a drop in energy costs last month, the price of clothing, airline fares and medical care also declined. The CPI rose 2.2 per cent in the 12 months through April.

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Specifically, gasoline prices fell by 6.4%. Prices for U.S. Treasuries rallied, while stocks on Wall Street were little changed.

More important, the rate of inflation over the past 12 months slowed to 1.9% in May from a five-year high of 2.7% just four months ago.

The cost of goods and services for American consumers fell in May for the second time in three months as inflation continued to recede from a recent high-water mark.

The cost of food, however, increased for the fifth straight month.

Within the retail report, sales were down 0.3 percent even after excluding the more volatile food and auto categories, the first decline for the core measure since August.

The Central Statistics Office (CSO) revised upwards the IIP growth figure for March to 3.75 per cent from provisional estimate of 2.7 per cent released last month.

Restaurants and bars also saw a 0.1 percent decline in May.

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