USA inflation falls in May on dip in gasoline prices

USA inflation falls in May on dip in gasoline prices

The so-called core CPI, which strips out food and energy costs, rose 0.1 per cent in May after a similar gain in April.

U.S. retail sales in May recorded their biggest drop in 16 months and consumer prices unexpectedly fell, suggesting a softening in domestic demand that could limit the Federal Reserve's ability to continue raising interest rates this year.

June 14 The dollar index on Wednesday fell to its lowest since November 9 against a basket of major currencies that measure its strength after the release of weaker-than-expected U.S. CPI and retail sales data. "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 USA economist at Capital Economics in Toronto.

Unemployment dropped by 50,000 to 1.53 million in the quarter, a 42-year low unemployment rate of 4.6%. Unemployment in May dipped to 4.3 percent.

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For now, Fed officials don't appear overly concerned with the recent downward path, attributing it at least in part to one-time drops in prices for things like wireless telephone services and prescription drugs. Food prices climbed 0.2% last month and were up 0.9% from a year earlier.

Investors were still expecting the Federal Open Markets Committee to increase USA overnight interest rates later on Wednesday at the conclusion of its June policy meeting.

Given that the energy prices were widely anticipated to fall, eyes were on core inflation, which rose a modest 0.1 percent in the recent string of weak readings.

The economy grew at a 1.2 percent annualized rate in the first quarter, held back by a near stall in consumer spending and a slower pace of inventory investment. By then, the Fed's forecast would put its key policy rate at 3 percent.

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The monthly core CPI was restrained by decreases in the prices of apparel, airline fares, communication and medical care services.

Pay growth dropped to a weaker than expected 1.7% in the quarter, while inflation rose to 2.9% last month, resulting in a pay cut of £147 for the average United Kingdom worker. The CPI rose 2.2 per cent in the 12 months through April.

The U.S. headline consumer price inflation fell on a sequential basis in May. The index, which tracks the greenback against the currencies of major U.S. trade counterparts, was above the 97 level before the data release. This rise was owing to 0.3 percent rise in rents and 0.2 percent rise in owner-occupied housing. And April retail sales were revised upward to a 0.4 percent gain, from 0.3 percent initially reported.

Retail sales - reflecting spending at stores, restaurants and websites - fell 0.3% in May, the biggest decline since January 2016, the Commerce Department said.

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Sales at nonstore retailers led by Amazon (AMZN) and building materials suppliers such as Home Depot (HD) have been the strongest categories, while sales at department stores such as Macy's (M) continue to bleed.

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