Recent data have suggested that inflation may even be slowing further.
Most retail names are down roughly 1 percent on the weaker-than-expected retail sales.
Americans cut spending at petrol stations, department stores and electronics shops in May as retail sales registered their biggest drop in 16 months, a cautionary sign for the economy. Prices fell 0.3% in March.
USA retail sales recorded their biggest drop in more than a year in May amid declining purchases of motor vehicles and discretionary spending, which could temper expectations for a sharp acceleration in economic growth in the second quarter.
Consumer spending accounts for more than two-thirds of the USA economy and last month's weak core retail sales reading could temper expectations for a sharp acceleration in economic growth in the second quarter.
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. The Atlanta Fed is forecasting GDP rising at a 3.0 per cent annualised rate in the second quarter.
Falling prices were widespread, with declines recorded for air fares, which were down a sharp 2.9 percent, as well as medical services, clothing and new and used cars. The CPI rose 0.2 per cent in April.
"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. The core CPI increased 1.7 percent year-on-year, the smallest rise since May 2015, after advancing 1.9 percent in April.
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The headline CPI for the 12-months through May fell below the Fed's two percent target to 1.9 percent last month, continuing a steady decline since February. Prices for U.S. Treasuries rallied, while stocks on Wall Street were little changed.
Similarly, mining sector output grew at 4.2 per cent during the month under review compared to 6.7 year ago.
The so-called core CPI, which strips out food and energy costs, rose 0.1 percent in May after a similar gain in April as rents continued to increase moderately.
Pay growth dropped to a weaker than expected 1.7% in the quarter, while inflation rose to 2.9% last month, resulting in a pay cut of £147 for the average United Kingdom worker.
According to the CSO data, manufacturing sector, which constitutes 77.63 per cent to the IIP, grew at 2.6 per cent in April compared to 5.5 per cent in same month past year.
Economists had projected CPI to be flat, and retail sales to rise 0.1 percent. The 2.7 percent fall in energy prices mainly drove the drop in consumer price index. On a year-on-year basis, shelter costs rose 3.3 percent and have been a key driver lifting services inflation in the last two years.
Department store sales tumbled 1.0 percent, the largest drop since July 2016.
Sales at nonstore retailers led by Amazon (AMZN) and building materials suppliers such as Home Depot (HD) have been the strongest categories, while sales at department stores such as Macy's (M) continue to bleed. And April retail sales were revised upward to a 0.4 percent gain, from 0.3 percent initially reported. Excluding automobiles, retail sales also contracted by 0.3% on a monthly basis.