May Consumer Price Index Shows Increase In Food Prices

The Consumer Price Index for All Urban Consumers declined 0.1% in May after an 0.8% drop in April.

What Happened: Not all industries and goods saw a decline in price, as some essential consumer purchases saw an increase.

The CPI for food at home saw a 4.8% increase year-to-date for May 2020. The energy sector and specifically gas also saw a decline of 1.8% following a 10.8% decline in April.

The Consumer Price Index measures change in price by the consumer for goods and select services. The price index focuses on urban consumers specifically, representing over 90% of the total U.S. population.

Why It’s Important: Declines came in auto insurance, apparel, energy, the transportation industry and used vehicle purchases. With much of the nation still inside and life disrupted from the coronavirus, these industries are expected to see a decline in price as demand decreases. Many auto insurance companies were mandated to pay back a portion of insurance premiums because drivers were less likely to be leaving their homes.

Food saw an increase, with food at home increasing as most people started cooking at home more often.

Meat, poultry and eggs saw a 3.7% increase from April. This could be attributed to supply chain issues, as some of the largest meatpacking companies such as Tyson saw coronavirus infections in their plants.

What's Next: It's still extremely early to see the effects of today's environment on consumer behavior and firm pricing. With states reopening their economies, expect consumer spending to increase.

Supply chain issues will be the next focus for many companies as they move into the coming months.

The latest changes in price indexes were not as extreme as in April, which points to stabilization. Over the last 12 months the Consumer Price Index for all goods has increased 0.1% to 249.521.