Slide in Consumer Prices Ends; Index Rises 0.2% in May

Consumer prices, after registering the steepest nose dive in nearly four decades, reversed course and rose 0.2% in May as gasoline prices rebounded, the government reported today.

Despite the May gain, the first in four months, most analysts still expect prices for all of 1986 to rise no more than 2%, virtually half of last year’s 3.8% gain.

Even with last month’s increase, prices so far this year have declined at an annual rate of 1.4%.

The bulk of the increase in the consumer price index for May was accounted for by a 2.5% hike in gasoline prices, which had fallen 5.9% in February, 12% in March and 11.3% in April.

Food Slightly Higher

Food prices also rose, by only 0.4%, after gains of 0.1% in March and 0.3% in April.

Grocery store prices themselves rose 0.4%, while restaurant meal costs gained 0.5%.

The largest food price gain was posted for fruit and vegetables, which saw a 1.9% increase. But that was down from a 3.6% jump in April.

Energy prices other than gasoline showed continued declines, with heating oil and coal prices falling 4.4%. Natural gas and electricity prices fell 0.6%.

The overall May increase in the Labor Department calculation amounted to an annual rate of 2.2%.

Both private and government analysts said price declines appear to have run their course.

With the May figures, “the index has turned around. We are now seeing small increases again,” department analyst Patrick Jackman noted.

“The best of the deflation news is over. But how could it not be?” said Allen Sinai, chief economist for Shearson Lehman Bros.

He added that he does not anticipate a return of significant inflation. “Basically the U.S. and world economies remain sluggish, weak, especially on the industrial side, and there are ample supplies of basic commodities relative to demand. So there is no reason to expect a rebound in inflation.”

The turnaround had been evident in last week’s wholesale price report, which said that costs one stop short of the retail level had risen 0.6% in May, the first hike in that computation this year.

In other details on May price activity, the Labor Department said:

--New automobile prices increased 0.9% after rising 0.5% in April, while used car prices fell 1.9% after dropping 0.8% the month before.

--Medical care costs were up 0.6%, matching the April gain.

--Clothing costs fell 0.2% after a 0.3% rise in April.

--Overall housing costs were down 0.1% in May after rising 0.3% in April.