**MNI 5 Things: US May CPI, Core Right On Expectations +0.2%>

--5 Things We Learned From The May CPI Data

By Kevin Kastner and Holly Stokes

     WASHINGTON (MNI) - The following are the key points from the 

Consumer Price Index data for May released by the Bureau of Labor 

Statistics Tuesday: 

     - May CPI rose 0.2% month/month, for both overall and core, right 

on analysts expectations, so the market reaction should be restrained. 

The headline gain was +0.209% before rounding. As highlighted in an MNI 

5 Things, analysts have a tendency to overestimate CPI in May, but they 

have a good track record of estimating core CPI. 

     - Core CPI was +0.171% unrounded, so on the low side of +0.2%. The 

large owners' equivalent rents category rose 0.2%, while lodging away 

from home prices jumped 2.9%, medical care prices rose 0.2% and new 

vehicle prices rebounded by 0.3% after a 0.5% decline in April. 

Providing some offset, apparel prices were flat and used vehicle prices 

fell 0.9%, continuing the string of declines. 

     - The y/y rate for headline CPI rose to 2.8% in May vs 2.5% in 

April, hitting the highest point since February 2012. At the same time, 

the y/y rate for core CPI rose to 2.2% from 2.1%, the highest since 

February 2017. Overall, the data suggest modest acceleration in 

inflation what will allow the FOMC to continue to its gradual rate hike 

path. 

     - The core CPI data are generally well forecasted by analysts, so 

today's data are in line with that trend. 

     - Energy prices rose by 0.9% for May after a 1.4% increase in 

April, with gasoline prices up 1.7%, but electricity prices up only 0.1% 

and gas utilities prices down 0.6%. Energy prices were up 3.6% 

unadjusted, so seasonal adjustment did subtract some of the strength. 

CPI excluding only energy was also up 0.2%, while food prices were flat. 

     ** MNI Washington Bureau: 202-371-2121 ** 

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