Consumer Prices in U.S. Probably Rose in May at Slowest Pace in Six Months

The cost of living in the U.S. probably rose in May at the slowest pace in six months as fuel costs waned, economists said before a report today.

The consumer-price index increased 0.1 percent after a 0.4 percent gain in April, according to the median forecast of 79 economists surveyed by Bloomberg News. The so-called core measure, which excludes more volatile food and energy costs, may have increased 0.2 percent for the fourth time in five months.

The data support Federal Reserve Chairman Ben S. Bernanke ’s expectation that the jump in commodity expenses will prove to be temporary. Companies like McDonald’s Corp. (MCD) and Abercrombie & Fitch Co. (ANF) are among those that haven’t been able to fully pass cost increases along to customers as higher energy prices and unemployment caused consumer spending to cool.

“The moderation in fuel costs is welcome news,” said Gregory Daco, a senior economist at IHS Global Insight in Lexington, Massachusetts . “The risk of spiraling inflation in the U.S. currently seems far-fetched given the substantial labor-market slack and muted wage growth.”

The Labor Department’s price data are due at 8:30 a.m. in Washington. Estimates of the economists surveyed ranged from declines of 0.2 percent to gains of 0.4 percent.

Another report today is projected to show the worst of the slowdown in manufacturing as a result of the disaster in Japan has already passed. Fed figures at 9:15 a.m. will show industrial production grew 0.2 percent in May after stalling in April, according to the Bloomberg survey median. A regional report from the New York Fed, released at 8:30 a.m., may show factories expanded at a faster rate in June.

May’s projected increase would mean consumer prices climbed 3.4 percent over the past 12 months, the biggest year-to-year gain since October 2008.

The advance in core prices since May 2010 would accelerate to 1.4 percent, the most since January 2010.

Fed Chairman Ben Bernanke said the U.S. economy , which slowed in the first quarter, will likely pick up as fuel costs fall and as factories in Japan recover from the March earthquake and tsunami, which disrupted auto-parts supplies. There isn’t “much evidence that inflation is becoming broad-based or ingrained,” Bernanke also said at a June 7 speech in Atlanta.

The central bank’s preferred price gauge, which excludes food and fuel, rose 1 percent in April from a year earlier. Fed policy makers aim for long-run overall inflation of 1.7 percent to 2 percent, according to their April forecast.

SSD recipients can expect a cost of living increase in 2012 | Los ...

After going more than three years without a sorely needed cost of living adjustment, Social Security beneficiaries are expected to receive an increase in benefits next year. Currently, that increase is predicted to be less than one percent, but if gas prices and other costs remain high, beneficiaries may see as much as a two percent increase in their benefit amounts.

Recipients of Social Security, Social Security Disability, and similar programs, have not received a cost of living increase since 2008. During the third quarter of that year, the government awarded an increase of 5.8 percent, which is the highest such increase on record since 1982. Because the 2008 jump was so high, it has taken this many years for inflation to surpass that level set in the third quarter of 2008.

But now, as gas prices have once again gone up, simultaneously raising the cost of food and other necessities, that inflation level has crept up past the mark set in 2008. The Social Security Administration has projected the cost of living adjustment based on inflation assumptions from last December. At that time, the increase was expected to be around 0.7 percent.

But the actual cost of living adjustment will be based on a comparison of the inflation rate during the months of July, August and September to that during the third quarter of 2008. Because gas prices have, of course, increased significantly since December, analysts are predicting that the cost of living increase could be as high as two percent.

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