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Consumer Prices Up Sharply
So far this year, consumer prices have been rising at an annual rate of 5.5 percent, double the 2.5 percent for all of 2006. The acceleration has occurred because of the surge in energy costs and increases in food costs that have been caused in part by higher demand for ethanol, which is produced with corn.
Excluding food and energy, core prices are up at an annual rate of 2.1 percent through May, a better showing than the 2.6 percent rise for all of 2006.
It is the core figure that officials at the Federal Reserve follow closely. Fed policy-makers pushed interest rates up for two years in an effort to slow the economy enough to keep inflation under control, but since the last rate hike in June 2006, they have been content to leave rates unchanged.
For May, energy prices rose by 5.4 percent, driven by a 10.5 percent jump in gasoline pump prices. The surge in gasoline costs appears to be moderating with the nationwide average falling by 7 cents in the past three weeks to $3.11 per gallon, according to the Lundberg Survey. That was still 95 cents higher than at the start of the year, and many economists say they are not looking for gas prices to fall much further as the country moves into the peak summer driving season.
Food costs were up 0.3 percent in May. Vegetable prices fell, but beef, poultry and fresh fruit prices were up.
The cost of new cars fell by 0.2 percent, while the cost of airline fares was down 0.6 percent and clothing costs dropped by 0.3 percent.
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