Federal Reserve Chairman Ben Bernanke contributed to a 199-point drop in the Dow Jones industrial average on June 5 when he called recent increases in inflation "unwelcome" developments. Many economists believe the Fed will raise rates for a 17th time when they meet on June 28-29.
Gasoline prices were up 2.2 percent in May after having soared by 12.3 percent in April with motorists in many parts of the country facing pump prices that are above $3 per gallon.
The rising pain at the pump combined with a plunging stock market have caused consumer confidence to decline and raised worries about the ability of Americans to keep shopping.
Since consumer spending accounts for two-thirds of total economic activity, many analysts believe there will be a sharp slowdown in overall economic growth in coming months.
Sales of autos fell by 1.6 percent in May after having risen by 0.8 percent in April. Outside of autos, sales at gasoline stations increased by 1.9 percent last month after rising 5.5 percent in April. However, those huge gains primarily reflected the big jump in gasoline prices during those two months, increases that left consumers with less money to spend on other items.
Excluding the rise at gasoline stations, sales at other retailers actually fell by 0.1 percent last month.
Over the past 12 months, inflation at the wholesale level has risen by 5.6 percent. Excluding food and energy, the increase has been a more modest 1.5 percent increase. However, there are worries that the relentless rise in energy prices is beginning to spill over into inflation pressures outside of energy.
The 0.5 percent drop in food prices reflected big declines in the price of eggs and vegetables which helped offset a 2.3 percent increase in beef prices.
The cost of passenger cars fell by 0.4 percent in May but the price of pharmaceutical products rose by 1.9 percent, the biggest gain since July of last year.
