U.S. airline tickets post highest monthly gain in 15 years

Written By Unknown on Selasa, 17 Juni 2014 | 22.40

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The price of plane tickets increased by 5.6 per cent in May, the largest monthly jump since 1999. (Mark Blinch/Canadian Press)

U.S. consumer prices increased in May by the largest amount in more than a year as the cost of food and gasoline showed big gains and airline fares jumped by the largest amount in 15 years.

The consumer price index rose 0.4 percent in May, the biggest one-month jump since a 0.6 percent increase in February 2013, the Labor Department reported Tuesday.

Over the past 12 months, consumer prices are up 2.1 percent. While that was the biggest 12-month price change since October 2012, it still left prices rising at a modest pace near the Federal Reserve's 2 percent target.

Excluding volatile food and energy, core inflation was up 0.3 percent in May, the biggest one-month gain since August 2011. Over the past 12 months, core prices are up 2 percent.

The 0.4 percent May price rise reflected gains in a number of areas. Food costs were up 0.5 percent, the largest increase since a similar gain in August 2011. Food costs have been driven higher this year by an unusually harsh winter and a drought in California.

Energy costs were up 0.9 percent in May, the biggest one-month gain since December. Gasoline prices increased 0.7 percent last month.

Outside of food and energy, there were widespread price pressures as well. Airline tickets were up 5.8 percent in May, the biggest one-month gain since July 1999. The cost of clothing, prescription drugs and new cars all showed increases in May.

Even with the May price increases, inflation is still advancing at moderate rates around the 2 percent target set by the Federal Reserve, which has the job of managing interest rates to foster stable prices and maximum employment.

Low inflation has allowed the Fed to keep interest rates exceptionally low in an effort to boost economic growth without having to worry about inflation getting out of hand. A measure of inflation preferred by the Fed that is tied to consumer spending patterns has been running below the Fed's target of 2 percent for the past two years.

The central bank was meeting Tuesday and Wednesday with Fed officials widely expected to keep a key short-term rate at a record low near zero. The Fed is not expected to begin increasing that rate for another year.

While it is the Fed's job to keep inflation from rising too quickly, it also watches to make sure that prices do not rise too slowly. That can signal a weak economy and generate further weakness as consumers stop buying big-ticket items in hopes that prices will fall further.

The Fed will update its economic forecasts on Wednesday and analysts are looking for the growth figure to be trimmed to reflect the very weak start to the year. Despite the weakness, which was related to a harsh winter, economists believe the economy will rebound to growth rates of 3 percent or better for the rest of this year.

The first quarter weakness did not derail improvements in the job market with unemployment falling to 6.3 percent, the lowest point in more than five years. But Fed Chair Janet Yellen has suggested that the overall unemployment rate is overstating the health of the job market and the economy, a view that is seen as signaling no sudden action by the Fed to start raising interest rates, as long as inflation gains remain modest.


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