U.S. consumer prices fell 0.1 percent in May, the first decline in 10 months, as energy prices decreased after surging during the previous three months, the Labor Department announced today. The decline in the closely watched consumer price index (CPI) followed gains of 0.5 percent in April, 0.6 percent in March, and 0.4 percent in February. Those increases had been driven by soaring energy costs this year as crude-oil prices hit record highs in early April. Analysts had expected inflation to slow in May due to recent declines in energy prices, but an actual drop in prices was a surprise. Inflation in most areas of the economy was well contained last month, with "core" CPI, which excludes volatile energy and food costs, rising just 0.1 percent. Energy prices fell 2 percent in May, led by a 4.4 percent drop in retail gasoline prices, the biggest decline since a 5 percent drop in July 2004. The moderation in inflationary pressures in May helped raise the incomes of American workers. Weekly earnings of workers after adjusting for inflation rose by 0.3 percent last month, reversing three consecutive months of declines. In other economic news, the Commerce Department reported today that business inventories kept on store shelves and in backlots rose by 0.3 percent, a slowdown from the gains of the previous several months. Analysts expect rising inventories, which added significantly to economic growth in the first quarter of this year, to slow in the current April-June quarter.
