Economy Watch: Inflation Heats Up in May

The price of gasoline and shelter continue to contribute to the increase in the all items index in May, which ticked up by 0.2 percent.

The Consumer Price Index increased 0.2 percent in May after rising 0.2 percent in April, the Bureau of Labor Statistics reported on Tuesday. Over the last 12 months, the all items index rose 2.8 percent, which is the fastest pace for inflation in about six years.

The price of gasoline and shelter were the largest factors in the increase in the May all items index, as they were in April, the BLS said. The price of gas increased 1.7 percent for the month more than offsetting declines in some of the other forms of energy. Overall, the cost of energy was up 0.9 percent during May.

Other sometimes drivers of inflation were more subdued. The cost of medical care rose 0.2 percent in May, while the cost of food was unchanged month-over-month. Without energy or food, the core rate of inflation was also 0.2 percent for the month, but rose 2.2 since the same month of last year.

If that rate of inflation stays, it will eat up all of the already meager gains that workers have been making recently, which could have an impact on consumer spending. In May, the BLS reported separately, average hourly earnings for all workers rose by 8 cents to $26.92 per hour. Over the year, average hourly earnings have increased by 71 cents, or 2.7 percent.