Consumer Price Index: May Core at 1.22%

The Bureau of Labor Statistics released the May Consumer Price Index data this morning. The year-over-year non-seasonally adjusted Headline CPI came in at 0.12%, down from 0.33% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 1.22%, down from 1.43% the previous month and below the Fed's 2% PCE target.

Here is the introduction from the BLS summary, which leads with the seasonally adjusted monthly data:

The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.1 percent in May on a seasonally adjusted basis after falling 0.8 percent in April, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 0.1 percent before seasonal adjustment.

Declines in the indexes for motor vehicle insurance, energy, and apparel more than offset increases in food and shelter indexes to result in the monthly decrease in the seasonally adjusted all items index. The gasoline index declined 3.5 percent in May, leading to a 1.8-percent decline in the energy index. The food index, in contrast, increased 0.7 percent in May as the index for food at home rose 1.0 percent.

The index for all items less food and energy fell 0.1 percent in May, its third consecutive monthly decline. This is the first time this index has ever declined in three consecutive months. Along with motor vehicle insurance and apparel, the indexes for airline fares and used cars and trucks declined in May. The indexes for shelter, recreation, medical care, household furnishings and operations, and new vehicles all increased.

The all items index increased 0.1 percent for the 12 months ending May. The index for all items less food and energy increased 1.2 percent over the last 12 months; this compares to a 2.4-percent increase a few months ago (the period ending February). The energy index fell 18.9 percent over the last year. The food index increased 4.0 percent over the last 12 months, with the index for food at home rising 4.8 percent. [More…]

Investing.com was looking for a -0.1% MoM change in seasonally adjusted Headline CPI and a -0.1% in Core CPI. Year-over-year forecasts were 0.2% for Headline and 1.3% for Core.

The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since the turn of the century. The highlighted two percent level is the Federal Reserve's Core inflation target for the CPI's cousin index, the BEA's Personal Consumption Expenditures (PCE) price index.

 

The next chart shows both series since 1957, the year the government first began tracking Core Inflation.

 

In the wake of the Great Recession, two percent has been the Fed's target for core inflation. However, at their December 2012 FOMC meeting, the inflation ceiling was raised to 2.5% while their accommodative measures (low Fed Funds Rate and quantitative easing) were in place. They have since reverted to the two percent target in their various FOMC documents.

Federal Reserve policy, which in recent history has focused on core inflation measured by the core PCE Price Index, will see that the more familiar core CPI is now at the PCE target range of 2 percent.