Consumer Prices Rise 0.6% in May

onsumer prices rose 0.6% in May, the Labor Department said Tuesday, the largest increase since January 2001 and a sign that inflation is making a return.

The consumer price index, which rose 0.2% in April, is government's most closely watched inflation gauge.

Almost 60% of the CPI covers prices consumers pay for services. If consumer prices are rising, it could reflect an uptick in demand for consumer goods, which increases the demand for trucking services.

Commerce said food prices jumped 0.9%, the biggest increase since January 1990. Analysts said more expensive transportation costs due to higher fuel prices were a factor in the increase in food prices, the Associated Press reported.

Energy prices rose by 4.6%, the largest gain since January, Commerce said.

Through May, consumer prices rose at a seasonally adjusted annual rate of 5.1%, far exceeding the 1.9% increase for all of last year. Core prices increased at a rate of 2.9%, also faster than the 1.1% advance registered for 2003.

With inflation rising, the Federal Reserve, which has kept a key short-term interest rate used to influence economic activity at a 46-year low of 1% for almost a year, is expected to raise rates at the end of a two-day meeting June 29-30, Reuters said.