Oil and Food Push Consumer Prices Higher in May

from the New York Times

By MICHAEL M. GRYNBAUM

Inflation hit hard in May as prices for a wide swath of consumer goods rose at their fastest pace in six months, underscoring warnings from central bankers and adding to a growing consensus that the Federal Reserve might raise interest rates by the end of the year.

The Consumer Price Index, which measures prices of a batch of common household products, rose 0.6 percent last month, as Americans were forced to cope with a sharp increase in fuel costs. The report, released Friday by the Labor Department, is considered a benchmark measure of inflation.

On Wall Street, the major stock indexes rose after the report, with the Standard & Poor’s 500-stock index up 0.85 percent in afternoon trading. The Dow Jones industrials, which had gained more than 95 points, in morning trading was up about 80 points.

The index, which rose more than economists had forecast, comes on the heels of repeated warnings about inflation from the world’s central banks. Ben S. Bernanke, the chairman of the Fed, joined other top officials this week in focusing on higher prices, citing the economic damage wrought by the record run-up in food and oil prices around the world.

The speeches have fueled a growing sense on Wall Street that the Fed has shifted its focus from supporting growth to fighting inflation. The May C.P.I. will probably heighten expectations that higher interest rates, which tend to hold down prices, may be in the offing.

In May, gasoline prices rose 5.2 percent, and were up 21 percent compared with a year ago, according to the report. They may rise again in June: the nationwide average for gasoline topped $4 a gallon last weekend as the price of oil leaped to a new high.

The cost of eating rose, as well, as Americans paid 5 percent more for foods and beverages in May than a year ago.

On an annual basis, inflation worsened for the first time in three months, reversing a downward trend. Inflation ran at 4.2 percent in May compared with a year ago.

High oil prices also pushed up costs for other products, as businesses, squeezed by higher shipping and production costs, sought to raise the prices paid by their customers. Prices for transportation, commodities, tobacco and utility fuels all increased for the month. Excluding the cost of food and gasoline, inflation ran at 0.2 percent for the month.