US Federal Reserve building in Washington DC. Picture: REUTERS
US Federal Reserve building in Washington DC. Picture: REUTERS

Washington — Falling US petrol prices drove both inflation and retail sales down in May, according to government data released on Wednesday.

The figures came out just hours before the Federal Reserve concludes its two-day monetary policy meeting where it is widely expected to increase interest rates, despite weak inflation and tepid wage growth.

The consumer price index (CPI), which tracks changes in the cost of household goods and services, declined 0.1% compared with April — largely driven by 6.4% drop in the cost of fuel at the pump, according the to the labour department.

Meanwhile, retail sales dropped a surprising 0.3% in May, also due in part to falling petrol prices, as Americans also bought fewer appliances and electronics, the commerce department reported.

Analysts had projected CPI to be flat, and retail sales to rise 0.1%.

Excluding the food and fuel categories, which can see big swings from month to month, CPI rose 0.1%. The 12-month overall price measure fell below the Fed’s 2% target to 1.9% last month, continuing a steady decline since February, while the core, which has been falling since January, slipped another two-tenths to 1.7%.

Retail sales were still down 0.3% even after excluding the more volatile food and cars categories, the first decline for the core measure since August.

Car sales remained sluggish for the month, falling 0.2% in May, while sales at electronics and appliance stores saw their largest monthly decrease in more than seven years, falling 2.8% for the month.

Petrol stations’s sales fell 2.4%, the biggest dip since February of last year.

The shift towards internet retail continued apace, with department stores declining a full percentage point while "nonstore" retailers soared another 0.8% for the month.

Restaurants and bars also saw a 0.1% decline in May.

American consumers forked out a total of $473.8bn for the month, 3.8% above May of last year.

AFP

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