Headline consumer-level inflation pressures unexpectedly grew through May, leveraging already hearty expectations for the Federal Reserve to deliver a rate hike sometime over the next three months. The Labor Department data reported a 0.6 percent increase in the Consumer Price Index last month - the sharpest increase since November and the hghest reading since November. The annualized figure was similarly surprising.
Against expectations of no change, inflation actually accelerated to a 4.2 percent clip for the quicket pace of expansion in four months and only a tick off the multi-year high set back in January. However, a look to the core inflation read suggests the pressures may be isolated to necessary goods rather than teh discretionary type. A look to the index's breakdown showes that most of the usual culprits were stoking the fires of inflation. Energy prices rose 4.4 percent on the month with a generous contribution from a 5.7 percent jump in gasoline. The other major burden was food, which was 0.3 percent more expensive from April. Adding to the mix, and simultaneously lowering hopes for a housing market rebound, home costs rose for yet another month by 0.5 percent. Despite these pressures though, the popular discretionary groups were actually on the wane. Apparel prices dropped 0.3 percent, vehicle costs fell another 0.1 percent as consumers are put off by gas prices and computers were discounted another 1.8 percent. Even with this obvious skew in inflation trends, the Fed will no doubt respond with its promise to target inflation pressures - even if consumer spending may suffer the consequences.