The CPI-U fell 0.1% in May, the first m/m decline since last July and compared to Consensus expectations for a 0.1% rise. During the first five months of 2005 the CPI is up 4.7% at an annual rate.

Pricing power less food & energy continued modest. A 0.1% increase followed no change in April and during the first five months of this year the core CPI is up 2.4% at an annual rate. Consensus expectations had been for a 0.2% May increase.

The 0.2% increase in core goods prices recovered some of April's decline led by a 0.5% m/m gain in used car & truck prices and a 0.5% gain in medical care commodities. Apparel prices were unchanged (-0.8% y/y) following April's 0.6% decline and home furnishings & operation prices rose 0.6% (1.1% y/y) due to strength in the "other" category. New motor vehicle prices rose 0.1% (0.9% y/y).

Services price inflation eased from the low reading in April. Shelter prices were unchanged for the second consecutive month (2.4% y/y) and medical care services prices rose the same 0.3% as during April (5.0% y/y). Public transportation prices were strong for the third consecutive month though the 0.7% gain (3.5% y/y) was down from 1.7% and 1.3% during the prior two months. School tuition costs firmed 0.7% (6.7% y/y).

Energy prices fell 2.0% led by a 4.4% drop in gasoline prices which have fallen another 1.8% so far in June to an average $2.12 per gallon.

Food price inflation eased to 0.1% following the 0.7% jump in April.

The chained CPI which adjusts for shifts in the mix of consumer purchases was unchanged and less food & energy chain prices fell 0.1%.