US consumer prices slipped 0.1 percent in May

Retail inflation dropped to an all time low of 2.18 per cent in May. The CPI based retail inflation stood was at 2.99 per cent in April 2017. In May 2016 it was at 5.76 per cent. Press Trust of India file

Retail inflation dropped to an all time low of 2.18 per cent in May. The CPI based retail inflation stood was at 2.99 per cent in April 2017. In May 2016 it was at 5.76 per cent. Press Trust of India file

Still, the USA central bank is expected to raise interest rates by 25 basis points later on Wednesday, the second increase this year.

The U.S. Labor Department said Wednesday that the consumer price index edged down 0.1% last month following a small 0.2% increase in April. In the 12 months through May, the CPI rose 1.9 percent, the smallest increase since last November, after advancing 2.2 percent in April.

Looking at the actual inflation data, the figure for monthly CPI showed a 0.1% decline in May, contrasting analysts' forecasts who projected it to remain flat and the 0.2% rise from April. Core inflation, which excludes energy and food, rose a slight 0.1% in May.

While the US central bank is expected to raise interest rates by 25 basis points at the end of a two-day meeting later on Wednesday, weak inflation, if sustained, could put further monetary tightening this year in jeopardy. This rise was owing to 0.3 percent rise in rents and 0.2 percent rise in owner-occupied housing.

Economists have said they think consumer spending, which accounts for about 70 per cent of USA economic activity, will pick up in the spring and summer after a slow start to 2017.

Most retail names are down roughly 1 percent on the weaker-than-expected retail sales.

Falling prices were widespread, with declines recorded for air fares, which were down a sharp 2.9 percent, as well as medical services, clothing and new and used cars.

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"With employment near its maximum sustainable level and the labor market continuing to strengthen, the committee still expects inflation to move up and stabilize around 2% over the next couple of years in line with our longer run objective", Fed Chairwoman Janet Yellen said Wednesday.

Shelter costs - which account for about a third of the overall price index - increased 0.2% on the month and rose 3.3% on the year. Further rate hikes are likely to depend on the outlook for inflation and economic growth.

The Fed has a 2 percent inflation target and tracks an inflation measure which is now at 1.5 percent.

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.

In the retail sales report, auto sales fell 0.2 per cent after rising 0.5 per cent in April. Unemployment in May dipped to 4.3 per cent. Over the past 12 months, food costs are up just 0.9 percent while energy prices have risen 5.4 percent.

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.

Department store sales tumbled 1.0 per cent, the largest drop since July 2016. Receipts at restaurants and bars dipped 0.1 per cent, while sales at sporting goods and hobby stores fell 0.6 per cent.

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