The cost of living in the U.S. rose less than forecast in May, restrained by the first drop in food prices in almost four years and signaling inflation remains under control.
The consumer price index was up 0.1% after falling 0.4% in April, the Labor Department reported today in Washington. The median forecast of 82 economists surveyed by Bloomberg News called for an increase of 0.2%. The core index, which excludes volatile food and fuel costs, climbed 0.2% as projected.
A recession in Europe and slower growth in emerging markets such as China, combined with restrained wage gains in the U.S., have made it difficult for companies to raise prices. The lack of inflation gives Federal Reserve policy makers, meeting today and tomorrow in Washington, more leeway to address unemployment as they consider whether to dial down their record monetary stimulus.
“We don’t’ really have an inflation issue in this country,” said Omair Sharif, an economist at RBS Securities Inc. in Stamford, Connecticut. “Some Fed officials have expressed concern about inflation, but I think the Fed is cognizant of the fact that we’re probably at the low readings on inflation.”
Construction began on more houses in May and permits for future work on single-family projects rose to a five-year high, extending a rebound in residential real-estate that is helping shore up the expansion, another report showed today.
Housing starts climbed 6.8%, less than forecast, to a 914,000 annualized rate after a revised 856,000 pace in April, according to the Commerce Department. The median estimate of 82 economists surveyed by Bloomberg called for a] 950,000 rate. Applications to build one-family homes increased 1.3% to a 622,000 pace, the most since May 2008.
Stock-index futures held earlier gains after the reports. The contract on the Standard & Poor’s 500 Index maturing in September climbed 0.2% to 1,636.3 at 8:52 a.m. in New York.
Estimates for consumer prices in the Bloomberg survey ranged from a decline of 0.5% to a gain of 0.5%.
Another measure of inflation reached a 53-year-low, climbing 1.1% in April from the prior year, below the Fed’s long-run goal of 2%, the Commerce Department reported last month.