Rising gas, food costs squeeze Americans

Consumer prices surged in May at the fastest pace in 20 months, fueled by another big rise in gasoline and an increase in food, the government said Friday. Inflation was docile in other areas, with prices for computers, clothes, cars and airline tickets all falling.

The consumer price index rose 0.7%, the biggest one-month gain since fall 2005, when energy prices surged after Hurricane Katrina shut down Gulf Coast oil production. Excluding energy and food, the increase for so-called core inflation was 0.1%.

The big increases in energy and food prices mean that consumers are falling behind in the cost-of-living struggle. The government said in a separate report Friday that weekly earnings for nonsupervisory workers, after adjusting for inflation, fell by 0.2% in May. That was the fourth decline in the last five months, reflecting the bite inflation is taking out of paychecks.

“While financial markets love the fact that underlying inflation is tame, if you are an average American and see your food costs rising rapidly and gasoline above $3 per gallon, then inflation doesn’t seem so low,” said Mark Zandi, chief economist at Moody’s Economy.com.

Another sour note came from a Reuters/University of Michigan consumer sentiment survey showing reduced optimism this month that potentially reflects growing strain on household budgets from costlier food and energy. The consumer sentiment index slipped to 83.7 from 88.3 in May and was far below forecasts for a reading of 88.

In other news, the government reported that industrial output was flat in May after a strong 0.4% gain in April.

In a third report, the U.S. trade deficit increased by 2.5% to $192.6 billion in the January-to-March period.