Higher energy costs and the biggest increase in shelter costs in nine years kept U.S. consumer prices inching upward in May.
The Labor Department reported Thursday that the consumer-price index increased a seasonally adjusted 0.2% in May from the prior month. It was the third straight monthly rise in overall prices, reflecting the rally in oil prices and the weakening of the U.S. dollar.
Core consumer prices excluding food and energy also rose last month as shelter costs jumped 0.4% — the largest gain since February 2007. Economists surveyed by the Wall Street Journal had expected a 0.3% gain for overall prices and a 0.2% increase in core prices.
“Domestic price pressures have continued to build up as slack in the economy has diminished, providing the main driver for higher inflation,” Barclays economist Blerina Uruçi said in a note to clients.
The U.S. Federal Reserve has set a 2% target for annual inflation. Its preferred measure of inflation, the Commerce Department’s personal-consumption expenditures price index, is currently at 1.6%. In deciding Wednesday to hold interest rates steady, the central bank said it expected inflation to remain below its target through 2017.
The overall CPI has advanced 1% year-on-year while core prices have risen 2.2% on the year, marking the seventh consecutive month that annual core inflation matched or exceeded 2%.
“The firming in core prices has largely reflected a swift rise in the cost of shelter, especially rent,” the WSJ said. Owners’ equivalent rent of primary residences rose 0.3% in May after rising by the same margin in April.
In addition, gasoline prices increased 2.3% in May after surging 8.1% the previous month.
Among the categories that declined was food, which fell 0.2% — the fifth decline in the past seven months. Over the past year, food prices are up only 0.7%.