Latest Labor Dept. Data Shows Spike in Prices of Food, Oil, and More

Consumers were hit hard by a range of price increases last month, according to new data from the Bureau of Labor Statistics (BLS). Here are some highlights from the Consumer Price Index (CPI), which tracks the changes in costs of household goods:

The food index rose 0.5 percent in May after increasing 0.4 percent in each of the three previous months. The index for food at home increased 0.7 percent, its largest increase since July 2011. The gasoline index rose 0.7 percent. The index for all items less food and energy increased 0.3 percent in May after increasing 0.2 percent in March and April. The rent index rose 0.3 percent and the index for owners' equivalent rent increased 0.2 percent. The medical care index increased 0.3 percent in May, as the index for prescription drugs rose 0.7 percent. The index for airline fares rose sharply in May; its 5.8 percent increase was the largest since July 1999. "Economists … expected consumer prices to rise only 0.2 percent," Reuters notes, compared to the actual 0.4 percent increase.

The Associated Press states that the index for all items less food and energy, also known as core inflation, made "the biggest one-month gain since August 2011. Over the past 12 months, core prices are up 2 percent."

The price of meat, poultry, fish and eggs (a subset of the food index) shot up by 1.4 percent in May. The Weather Channel explains that "the price increases in meat can be directly tied back to the cumulative impact of the drought in California and Texas as well as the drought that hit the corn belt in 2012 and the blizzard … that hit South Dakota in October." Likewise, a drought in Brazil contributed to the boost in coffee prices.

Economist John Schoen writes for NBC that this may not warrant too much concern:

Despite the attention paid to gasoline prices, for example, they make up a relatively small portion (about 5 percent, on average) of the typical household budget. But they have an outsized impact on consumer spending because many people tend to tighten their budgets when they see pump prices jump.

The reason economists and the folks at the Fed are less interested in food and energy is that the prices of those two commodities are usually pretty volatile—jumping up and down month to month, much more than other goods and services. Those ups and downs eventually wash out of the system.

The outlook on oil is not as optimistic. The BLS's energy data do not take into account this month's instability in oil-rich Iraq. Although gas is already at "a six-year seasonal high,"  according to Bloomberg, disruptions to Iraq's oil flow "may boost pump prices by 10 cents a gallon at a time when they normally drop."

And, for what it's worth, some members of Congress aren't doing anything to reduce gas prices. Instead, Sens.  Chris Murphy (D-Conn.) and Bob Corker (R-Tenn.) today unveiled a plan to hike the federal gas and diesel taxes by 12 cents. 

The Federal Reserve just concluded a two day meeting, during which it dropped projected economic growth in the U.S. this year from 3 percent to between 2.1 percent and 2.3 percent. 

After the meeting, Federal Reserve Chair Janet Yellen said, "Recent readings on, for example, the CPI index have been a bit on the high side," but "the recent evidence that we've seen, abstracting from the noise, suggests that we are moving back gradually, over time, toward our 2 percent objective."