US inflation falls in May on dip in gasoline prices


Washington (AFP)

Falling US gasoline prices drove both inflation and retail sales down in May, according to government data released Wednesday.

The figures came out just hours before the Federal Reserve concludes its two-day monetary policy meeting and is widely expected to increase interest rates, despite weak inflation and tepid wage growth.

The Consumer Price Index, which tracks changes in the cost of household goods and services, declined 0.1 percent compared to April -- largely driven by 6.4 percent drop in the cost of fuel at the pump, according the to the Labor Department.

Meanwhile, retail sales dropped a surprising 0.3 percent in May, also due in part to falling gasoline prices, as Americans also bought fewer appliances and electronics, the Commerce Department reported.

Analysts had projected CPI to be flat, and retail sales to rise 0.1 percent.

Excluding the food and fuel categories, which can see big swings from month to month, CPI rose 0.1 percent.

The 12-month overall price measure fell below the Fed's two percent target to 1.9 percent last month, continuing a steady decline since February, while the core, which has been falling since January, slipped another two-tenths to 1.7 percent.

Retail sales were still down 0.3 percent even after excluding the more volatile food and cars categories, the first decline for the core measure since August.

Auto sales remained sluggish for the month, falling 0.2 percent in May, while sales at electronics and appliance stores saw their largest monthly decrease in more than seven years, falling 2.8 percent for the month.

Gasoline stations saw sales fall 2.4 percent, the biggest dip since February of last year.

The shift towards internet retail continued apace, with department stores declining a full percentage point while "non-store" retailers soared another 0.8 percent for the month.

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

American consumers forked out a total of $473.8 billion for the month, 3.8 percent above May of last year.