WASHINGTON — Falling energy prices cooled overall inflation in May, offering some relief to consumers who have been coping for months with high gas prices.
Consumer prices rose 0.2 percent last month, the smallest increase in six months, the Labor Department said Wednesday. It was the first drop in energy costs in nearly a year.
Still, Americans paid more for cars, clothing and hotel rooms in May. That drove “core” consumer prices, which exclude volatile food and energy, up by the most in nearly three years.
The increase in core inflation, which was higher than analysts expected, contributed to another bleak day on Wall Street. The Dow Jones industrial average tumbled 179 points.
Higher core prices will limit the ability of the Federal Reserve to take any additional steps to stimulate the economy. The Fed this month is wrapping up a $600 billion Treasury-bond-buying program that was intended to lower interest rates, boost stock prices and encourage spending.
Economists downplayed the increase in core prices. Auto prices will likely fall as the impact of supply disruptions from Japan fades and production picks up. And the big rise in hotel costs likely reflected a one-time increase before the summer travel season.
Most important, they noted, is that consumers are finally getting some relief from high gas prices. Prices have fallen by nearly 30 cents since peaking last month at a national average of $3.98 per gallon.
Inflation “is probably now close to peaking,” said Paul Ashworth, an economist at Capital Economics. “While the bigger monthly rise in core prices is a concern, a lot of it was due to temporary factors.”
A separate report from the Federal Reserve showed that U.S. factories produced more business equipment and construction materials last month. That boosted manufacturing output 0.4 percent last month and followed a decline in April.
