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United States Inflation May 2020

United States: Inflation continues to ease in May

Consumer prices fell 0.1% over the previous month in May missing market expectations of no change, but softer than April’s 0.8% dip. A fall in energy prices and a weaker increase in food prices was chiefly behind May’s print. Core consumer prices—which exclude volatile items such as food and energy—also fell 0.1% in May (April: -0.4% month-on-month).

Inflation ticked down to 0.1% in May—the lowest level since September 2015—from 0.3% in April, and came in a notch below market expectations of 0.2% inflation. Meanwhile, core inflation decreased to 1.2% from 1.4% in the month prior. The core personal consumption expenditures price index—a gauge of household spending closely tracked by the Fed—dipped to 0.5% in April, the latest month for which data is available, from 1.3% in March and falling further below the Fed’s 2.0% target.

Looking ahead, depressed employment levels will likely continue to hit demand and keep price pressures at bay in the coming months. Moreover, hydrocarbon prices should tread well below levels seen last year, which will weigh further on inflationary pressures.

The Fed’s monetary stimulus should only begin to stoke price pressures once domestic demand begins to recover, but should help to combat disinflationary pressures, to some extent.

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