Consumer prices fall 0.3% in May

— -- Falling gasoline prices pulled inflation lower last month, as consumer prices dropped 0.3% after being unchanged in April, the government said Friday.

The Consumer Price Index was led lower by a 3.9% drop in the price of energy, coupled with a small 1.7% gain in food prices, the Bureau of Labor Statstics reported. Excluding food and energy, whose prices are more volatile than the rest of the economy, the so-called core inflation rate climbe2.3%. Economists had expected the overall CPI to drop 0.2%, according to Moody's Analytics.

The drop was telegraphed by a 1% decline in wholesale prices for May announced Wednesday. Inflation in consumer prices for the last 12 months rose just 1.7%, as the economy's recent hiccups dampened any fears that prices would soon spike broadly. However, the modest inflation isn't likely to translate into fresh initiatives by the Federal Reserve to pump money into the economy even though growth has slowed this year, said Joel Naroff, president of consulting firm Naroff Economic Advisors.

"Inflation is not a big issue right now," Naroff said in an interview before the report was released. "At the Fed, I don't think it matters much to more than one or two people."

Low inflation could help consumers in an economy that has been slowing down, said Nigel Gault, chief economist at IHS Global Insight.

"The (inflation) news is good for consumers, since it signals relief at the gasoline pump and at the grocery store,''Gault wrote in a report yesterday. ``It will help prop up spending against a gloomier labor-market backdrop. It's also good news for producers (except for those in the commodity business), since it shows cost pressures easing."

The report showed prices stable, or close to it, for nearly all major consumer goods.

New-car prices rose just 1.3%, while electricity rates rose a puny 0.2% and piped gas used for heating and cooking plunged 14.9%, reflecting sharply lower prices for natural gas. Clothing prices rose by 4.4% and the cost of medical services climbed 3.9%, while shelter costs rose 2.3%.