US consumer prices dip 0.1 percent in May

The Consumer Price Index including owner occupiers' housing costs (CPIH) hit 2.7% after reaching 2.6% in April.

The biggest upward impact on the cost of living came from recreational and cultural goods and services - including holidays overseas - which overall rose 0.9% between April and May compared with a fall of 0.4% a year earlier. Nationally, gasoline prices have decreased slightly over the past month, while Utah gasoline prices continue to slowly increase.

House economists at foreign brokerage Bank of America Merill Lynch concurred, saying, they are "more confident" of a 0.25 per cent cut at the third bi-monthly monetary policy review on August 2. But some economists suggested that the unexpected slowdown in inflation in recent months might cause the Fed to slow the pace of further rate hikes. Furniture and household good prices increase 1.2% between April and May.

Over the last 12 months, the all items index rose 1.9%.

"The general mood on the economy has become one of caution over the past few weeks, with first-quarter GDP figures disappointing, consumer spending looking weaker and Brexit-related uncertainty looming large", said Ben Brettell, senior economist at Hargreaves Lansdown.

Maike Currie, investment director for personal investing at Fidelity International, said: "Our real income is being squeezed and we're witnessing this impacting United Kingdom consumer spending".

"Inflation never seems like a problem until suddenly it is and while it may be good news for borrowers, as it erodes the value of their debts, it has detrimental implications for savers, investors and retirees, chipping away at the value of future interest and dividend payments and eroding the worth of your capital pot".

That's bad news for businesses here selling into the United Kingdom market.

Higher inflation is also a key business concern, the British Chamber of Commerce pointed out, as it squeezes margins and weakens companies' ability to invest, particularly during this time of heightened political uncertainty. "We put this down to the negative impact of higher inflation on real wage growth so long as nominal wage growth remains subdued".

It also added to pressure on the Bank of England, even if it does not raise interest rates over the next three years, to hold off with any more injections of cash into the economy for fear of weakening the pound and fuelling inflation.

  • Zachary Reyes