Latest Data Shows Spike in Prices of Food, Oil, and More

Consumers were hit hard by a range of price
increases last month, according to new data from the Bureau of
Labor Statistics (BLS). Here are some highlights from
the Consumer Price Index (CPI), which tracks the changes in costs
of household goods:

• The food index rose 0.5 percent in May after increasing 0.4
  percent in each of the three previous months.
• The index for food at home increased 0.7 percent, its largest
  increase since July 2011.
• The gasoline index rose 0.7 percent.
• The index for all items less food and energy increased 0.3
  percent in May after increasing 0.2 percent in March and
  April.
• The rent index rose 0.3 percent and the index for owners’
  equivalent rent increased 0.2 percent.
• The medical care index increased 0.3 percent in May, as the
  index for prescription drugs rose 0.7 percent.
• The index for airline fares rose sharply in May; its 5.8
  percent increase was the largest since July 1999.

“Economists … expected consumer prices to rise only 0.2
percent,” Reuters
notes, compared to the actual 0.4 percent increase.

The Associated Press
states that the index for all items less food and energy,
also known as core inflation, made “the biggest one-month gain
since August 2011. Over the past 12 months, core prices are up 2
percent.”

The price of meat, poultry, fish and eggs (a subset of the food
index) shot up by 1.4 percent in May. The Weather Channel
explains that “the price increases in meat can be directly tied
back to the cumulative impact of the drought in California and
Texas as well as the drought that hit the corn belt in 2012 and the
blizzard … that hit South Dakota in October.” Likewise, a
drought in Brazil contributed to the boost in coffee prices.

Economist John Schoen
writes for NBC that this may not warrant too much concern:

Despite the attention paid to gasoline prices, for example, they
make up a relatively small portion (about 5 percent, on average) of
the typical household budget. But they have an outsized impact on
consumer spending because many people tend to tighten their budgets
when they see pump prices jump.

The reason economists and the folks at the Fed are less
interested in food and energy is that the prices of those two
commodities are usually pretty volatile—jumping up and down month
to month, much more than other goods and services. Those ups and
downs eventually wash out of the system.

The outlook on oil is not as optimistic. The BLS’s energy data
do not take into account this month’s instability in oil-rich Iraq.
Although gas is already at “a six-year seasonal high,” 

according to Bloomberg, disruptions to Iraq’s oil flow
“may boost pump prices by 10 cents a gallon at a time when they
normally drop.”

And, for what it’s worth, some members of Congress aren’t doing
anything to reduce gas prices. Instead, Sens.  Chris Murphy
(D-Conn.) and Bob Corker (R-Tenn.) today unveiled a plan to hike
the federal gas and diesel taxes by
12 cents. 

The Federal Reserve just concluded a two day meeting, during
which it dropped projected economic growth in the U.S. this year
from 3 percent to between
2.1 percent and 2.3 percent. 

After the meeting, Federal Reserve Chair Janet Yellen
said, “Recent readings on, for example, the CPI index have been
a bit on the high side,” but “the recent evidence that we’ve seen,
abstracting from the noise, suggests that we are moving back
gradually, over time, toward our 2 percent objective.”