US consumer prices slipped 0.1 per cent in May

Power generation rose by 5.4 per cent in April, down from 14.4 per cent expansion in April a year ago.

Meanwhile, retail sales dropped a surprising 0.3 per cent in May, also due in part to falling gasoline prices, as Americans also bought fewer appliances and electronics, the Commerce Department reported.

The dollar fell to its lowest since the day after last year's election against a basket of major currencies following the release of weaker-than-expected U.S. CPI and retail sales data on Wednesday.

"From out of nowhere we have now had three months of unusual weakness in underlying prices", said Paul Ashworth, chief economist at Capital Economics.

Growth is expected to pick up this quarter after being held back by a near stall in consumer spending and a slower pace of inventory investment at the start of the year.

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"Clearly officials will be mindful of incoming inflation trends in the coming months before greater confidence can be made with second half of the year policy normalization plans", said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina. May's increase was just below the 1.8 percent average annual increase over the past decade. The CPI rose 2.2 per cent in the 12 months through April. The Fed still foresees prices, as measured by a gauge tied to consumer spending, rising 2 percent in 2018 and 2019, achieving its target.

"With employment near its maximum sustainable level and the labor market continuing to strengthen, the committee still expects inflation to move up and stabilize around 2% over the next couple of years in line with our longer run objective", Fed Chairwoman Janet Yellen said Wednesday.

Clothing, housing, fuel and light also saw lower inflation rate in May while prices of vegetables declined by 13.44 per cent and that of pulses and products by 19.45 per cent. Prices for U.S. Treasuries rallied, while stocks on Wall Street were little changed.

American consumers forked out a total of US$473.8 billion (RM2 trillion) for the month, 3.8 per cent above May of previous year. Core inflation, which excludes energy and food, rose a slight 0.1% in May.

The Australian dollar rose 1.3 percent to its highest against its US counterpart since April 3.

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Last month, rental costs increased 0.3 percent, matching April's gain. Owners' equivalent rent of primary residence advanced 0.2 per cent after a similar increase in April.

The Fed on Wednesday increased borrowing costs for the second time this year, while acknowledging the recent moderation in inflation pressures.

Department store sales tumbled 1.0 percent, the largest drop since July 2016. That has led some retailers, including Macy's M.N , Sears SHLD.O and Abercrombie & Fitch ANF.N to announce shop closures.

Within the retail report, sales were down 0.3 percent even after excluding the more volatile food and auto categories, the first decline for the core measure since August.

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