The Consumer Price Index, which tracks the cost of household products from month to month, climbed 0.6 percent in May, the largest hike since November. Overall the cost of living has increased 4.2 percent in the last 12 months.
The largest driver in May’s numbers was the continued spike in fuel costs. During the month, the cost of fuel climbed another 5 percent. The high cost of fuel appeared at the pump with gas prices moving from an average of $3.51 a gallon in April to $3.82 in May.
Beyond filling up the tank, the gas prices also have affected other sectors of the economy, the government report said.
Food prices climbed 0.3 percent in May alone, meaning most Americans are paying 5 percent more than they did a year ago.
Despite the increase, some analysts found good news among the rising prices.
It’s pretty concentrated in the energy sector,” Lindsey Piegza, a market analyst at FTN Financial in New York, told Reuters.
The core inflation rate, which excludes the more volatile food and energy numbers, appeared to bolster this view, edging up a more modest 0.2 percent in May. That increase was in line with many analysts’ expectations.
Still, the increase in both the core inflation number and the CPI have raised some concerns that the Federal Reserve’s next move could be to increase interest rates in an effort to tamp down any threat of more serious inflation.
“This report isn’t going to relax the Fed,” Nigel Gault, chief U.S. economist at Global Insight Inc., told Bloomberg News Service. Gault, whose firm correctly predicted the hike in gas prices, added, “More headline price increases are coming.”
Wall Street also appeared heartened by the news as futures trading shot up with the news from the Labor Department.