The cost of living in the U.S. rose more than forecast in May, reflecting broad-based gains that signal inflation will move closer to the Federal Reserve’s goal.
The consumer price index increased 0.4 percent, the biggest advance since February 2013, after climbing 0.3 percent the prior month, a Labor Department report showed today in Washington. The median forecast of 81 economists surveyed by Bloomberg called for a 0.2 percent increase. Excluding volatile food and energy prices, the gain was the largest in almost three years.
A pickup in inflation lessens the threat of a prolonged drop in prices that hurts economic growth, giving Fed officials reason to continue to scale back their unprecedented bond-buying program. Continued hiring and faster wage gains will be needed to boost demand and enable consumers to cope with higher prices.
Costs rose 2.1 percent over the past 12 months, the most since October 2012, after a 2 percent year-over-year gain in April.
Another report today showed builders broke ground on 1 million homes in May, indicating the industry is picking up this quarter after a weather-induced slump to start the year.
The number of housing starts last month was in line with the median forecast of economists surveyed by Bloomberg and followed April’s 1.07 million annualized rate that was the most since November, according to figures from the Commerce Department. Permits, a proxy for future construction, decreased, reflecting a decline in the volatile multifamily category.
The Labor Department’s inflation report showed that stripping out volatile food and fuel, the so-called core measure increased 0.3 percent, the most since August 2011, and following a 0.2 percent gain the prior month. Economists had forecast a 0.2 percent advance, according to the survey median.
Source: Bloomberg
