June 10, 2020

The CPI fell 0.1% in May after having declined 0..8% in April and 0.4% in March.  The CPI excluding the volatile food and energy prices also fell 0.1% in May after having declined 0.4% in April which was the biggest decline in the history of the series which dates back to 1957.

Food prices climbed 0.7% in May after having risen 1.4% in April as food at home prices rose 0.,1% after having jumped 2.6% in April.  The food increase in May was partially attributable to beef prices which climbed 10.8%, pork increased 2.7%, poultry rose 2.2%, and fish and seafood climbed 0.9%.  Egg prices declined 4.8% after having jumped 16.1% in the previous month.  Most of these prices were triggered by supply interruptions brought on by the corona virus and will reverse themselves as the supply chain returns to normal., .

Energy prices fell 1.8% in May after having fallen 10.1% in April, 5.8% in March, and 2.0% in February. However, these prices have largely reversed themselves and are back close to where they started before the recession began.

Excluding food and energy the CPI fell 0.1% in May after having 0.4% in April and 0.1% in March. Airline prices fell 4.9% in May after having declined 15.2% in May and 12.6% in March%,  Apparel prices fell 2.3%.  Hotel and motel prices declined 1.5% in May after having dropped 7.1% in April and  7.7% in March.

But most of the declines described above should prove to be temporary.  Once people begin to crawl out of their holes restaurant prices, airfares, and lodging prices should rebound.

For what it is worth, we expect the CPI to rise just 0.9% in 2020 compared to a 2.3% increase in 2019.  The CPI ex food and energy is projected to increase 1.0% this year compared to an increase of 2.2% in 2019.

Stephen Slifer

NumberNomics

Charleston, SC