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May Consumer Price Index Year-over-Year: Flat Headline Inflation, Core at 1.7%

June 18, 2015

by Doug Short

The Bureau of Labor Statistics released the May CPI data this morning. The year-over-year unadjusted Headline CPI came in at -0.04% (rounded to 0.0%), up from -0.20% (rounded to -0.2%) the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 1.72% (rounded to 1.7%), down from the previous month's 1.81% (rounded to 1.8%).

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) increased 0.4 percent in May on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index was unchanged before seasonal adjustment.

The gasoline index increased sharply in May, rising 10.4 percent and accounting for most of the seasonally adjusted all items increase. Other energy indexes were mixed, with the fuel oil index rising but the electricity index declining and the index for natural gas unchanged. The food index was unchanged for the second month in a row, as a decline in the food at home index offset an increase in the index for food away from home.

The index for all items less food and energy rose 0.1 percent in May, its smallest increase since December. The indexes for shelter, airline fares, and medical care all increased, as did the indexes for personal care, recreation, new vehicles, alcoholic beverages, and tobacco. In contrast, the indexes for apparel, for household furnishings and operations, and for used cars and trucks all declined in May.

The all items index was unchanged for the 12 months ending May after showing a 0.2-percent decline for the 12 months ending April. The energy index fell 16.3 percent over the last 12 months, with the gasoline index down 25.0 percent despite rising in May. The food index increased 1.6 percent over the last year, and the index for all items less food and energy rose 1.7 percent. [More…] was looking for a 0.5% increase in the seasonally adjusted Headline CPI and a 0.2% rise in Core CPI. Year-over-year forecasts were 0.0% for Headline and 1.8% 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 Consumptions Expenditures (PCE) price index.

Headline and Core CPI since 2000

The next chart shows both series since 1957, which was the first time the government began tracking the core inflation metric.

Headline and Core CPI

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 remains below the PCE target range of 2 percent.