WASHINGTON — Higher costs of housing and power to run homes pushed consumer prices mildly higher in May, but inflationary pressure in the U.S. was largely subdued, and the cost of health care eased again.
The consumer price index rose by a seasonally adjusted 0.1 percent last month after falling 0.4 percent in April, the Labor Department said.
Economists polled by MarketWatch had expected a 0.2 percent increase.
In May, the energy index rose 0.4 percent, largely because of higher natural gas and electricity prices.
The price of food, meanwhile, dipped 0.1 percent. Dairy products, baked goods and nonalcoholic beverages all cost less in May.
Consumers were mostly pinched in May by higher rents and home prices.
In a surprise development, health care costs dropped in May after being unchanged in April. That's the first decline since 1975.
Core consumer prices, which exclude food and energy, advanced 0.2 percent. The core rate is viewed by the Fed as a more useful gauge of underlying inflationary trends.
Meanwhile, homebuilders ramped up construction in May, providing an economic boost while they sought to take advantage of an improving housing market defined by low inventory.
Housing starts increased 6.8 percent from revised April figures to a seasonally adjusted annual rate of 914,000, the Commerce Department said Tuesday. That was 28.6 percent higher than May 2012.
The faster rate of construction was attributable primarily to an increase in multifamily construction. Building of single-family homes barely rose, ticking up 0.3 percent. The housing start numbers, while up, were lower than what was expected by economists polled by Bloomberg News.
Building permits, an indication of future construction, dropped 3.1 percent from April, to a seasonally adjusted annual rate of 974,000. Economists had expected a decline after building permits soared to a multi-year high in April.
In the past 12 months, the core rate of inflation has risen just 1.7 percent, signifying little price pressure in the economy. Slow growth at home and overseas has dampened demand and the cost of many raw materials has leveled off or declined. Overall, consumer prices have climbed 1.4 percent in the past 12 months.
Labor costs have also been restrained. The average hourly pay of U.S. workers, for instance, fell 0.2 percent in May and is up a scant 0.5 percent over the past 12 months, adjusted for inflation.
The downside to sluggish wages, however, is that Americans lack the buying power to generate a more robust recovery. Consumer spending is the key to faster growth and hiring.
In any case, the lack of inflation has given the Fed the leeway to maintain its low-interest strategy, an approach meant to spur lending and borrowing in hopes of boosting the economy.
The central bank will offer more clues on whether it plans to maintain its strategy after its latest gathering of top officials on Wednesday.
U.S. financial markets have gyrated sharply over the past few weeks because of uncertainty about the Fed's intentions. The central bank wants to see clear signs of faster economic growth and a pickup in job creation before it starts to scale back monetary stimulus.
The nation's unemployment rate stood at 7.6 percent in May, and the Fed wants to see it fall toward 6.5 percent.