• Pricing power is weighed down by economic weakness due to coronavirus shutdowns.

• Food prices continue to strengthen.

• Energy prices weaken further.

The record decline in overall activity this quarter is weighing on pricing power. The CPI slipped 0.1% (+0.1%) during May following a 0.8% April drop which was the largest decline since late-2008. It was the third consecutive month of decline. The easing compared to expectations for no change in the Action Economics Forecast Survey. The CPI excluding food & energy also eased 0.1% (+1.2% y/y) last month after weakening 0.4% in April. The decline also was the third consecutive monthly fall. It compared to expectations for no change.

Despite the decline in prices overall, food prices increased 0.7% (4.0% y/y) led by a 1.0% strengthening (4.8% y/y) of prices for food at-home consumption. It followed a 2.6% upward spike during April. Meat, poultry & fish prices surged 4.3% (9.8% y/y) after a 3.6% gain. Egg prices eased, however, by 4.8% (+13.5% y/y) following a 16.1% jump. Cereal & cereal product prices strengthened 1.5% (3.2% y/y), about as they did in April. Dairy & dairy product prices increased 1.0% (5.7% y/y) after rising 1.5%. Fruit & vegetable prices rose 0.5% (1.5% y/y) after strengthening 1.5%. Offsetting the gains was a 0.8% decline (+2.3% y/y) in bakery product prices which came after a 3.1% jump. Nonalcoholic beverage prices held steady (4.1% y/y) after rising 2.9%. Prices for food away from home rose 0.4% (2.9% y/y) after edging 0.1% higher in April.

A decline in energy product prices offset these increases with a 1.8% drop (-18.9% y/y), the fifth consecutive monthly decline. Gasoline prices weakened 3.5% (-33.8% y/y) after double-digit declines during the prior two months. Fuel oil prices fell 6.3% (-37.5% y/y) to the lowest level in nearly 15 years. Natural gas prices rose 0.8% (-0.3% y/y) following a modest increase, while the cost of electricity fell 0.8% (-0.2% y/y) following a 0.1% uptick.

Goods prices excluding food & energy weakened 0.2% last month (-1.0% y/y), the third straight month of decline. The shortfall was led by a 2.3% weakening (-7.9% y/y) in apparel prices on the heels of two straight monthly declines. Recreation goods prices held steady (-2.1% y/y) after falling for three consecutive months and prices for medical care goods improved 0.1% (0.8% y/y), the first increase this year. New vehicle prices rose 0.3% (-0.3% y/y) but used car & truck prices fell 0.4% (-0.4% y/y) for a second straight month. Appliance prices held steady (1.2% y/y) after surging 1.1% while household furnishings prices improved 0.6% (0.9% y/y) for a second straight month. Prices for education & communication goods eased 0.1% (-3.5% y/y).

Services prices eased in May (2.0% y/y), down for the third straight month. It was paced by a 3.8% drop (-19.8% y/y) in the cost of public transportation. Recreation services prices strengthened a record 1.3% (4.3% y/y). Medical care service prices improved 0.6% (5.9% y/y) after two straight 0.5% gains. Education & tuition prices edged 0.1% higher (2.0% y/y) for a fourth straight month. Shelter costs rose 0.2% (2.5% y/y) following two months of stability but the owners' equivalent rent of primary residences gained 0.3% (3.1% y/y).

The Consumer Price Index data can be found in Haver's USECON database with additional detail in CPIDATA. The Action Economics survey figure is in the AS1REPNA database.