Energy prices provided a significant boost to U.S. headline inflation

U.S. CPI inflation came in a little below expectations in May, although it still rose a healthy 0.4% m/m, providing further evidence that the short-lived and energy-driven disinflationary period is over. Core CPI rose 0.1% m/m, below consensus expectations (0.2%). The NSA CPI index was 237.805, also lower than consensus (237.995) forecasts. Energy prices provided a significant boost to headline inflation, rising 4.3% m/m. Food prices were flat on the month. On a y/y basis, total CPI was 0.1% and core CPI 1.7%.

Services inflation moderated somewhat, but remains healthy. Services prices rose 0.2% m/m (previous 0.3%), as shelter inflation also slowed to 0.2% (previous 0.3%). In addition, medical services inflation normalized to 0.2% m/m (after what looked like an erratic jump in April of 0.9%). Transportation costs rose at a solid rate in May as a result of a 5.7% jump in airline fares. However, the latter has become particularly volatile since a change in the data collection methodology by the BLS, notes Barclays. 

Core goods prices declined 0.1% m/m after three consecutive increases. The series was driven lower by strong declines in the apparel (-0.5%) and used cars (-0.4%) components. However, used cars prices fell after posting strong consecutive increases since April, and this month's number should be read as payback. The other components posted healthy increases. 

"Overall, the small decline in core good prices suggests a marginal drag from this series on overall core CPI is likely. We continue to expect a moderate pick-up in core inflation this year, as a small drag from core goods inflation will likely be outweighed by a healthy rate of core services inflation." adds Barclays