Inflation shows signs of easing

WASHINGTON – Falling energy prices cooled overall inflation in May, offering some relief to consumers who have been coping for months with high gas prices.

Consumer prices rose 0.2 percent, the smallest increase in six months, the Labor Department said. It was the first drop in energy costs in nearly a year.

Still, Americans paid more for cars, clothing and hotel rooms in May. That drove so-called “core” consumer prices, which exclude volatile food and energy, up by the most in nearly three years.

The increase in core inflation, which was higher than analysts expected, contributed to another bleak day on Wall Street. The Dow Jones industrial average tumbled 179 points, reflecting fears that the worsening debt crisis in Greece could spread.

Inflation “is probably now close to peaking,” said Paul Ashworth, an economist at Capital Economics. “While the bigger monthly rise in core prices is a concern, a lot of it was due to temporary factors that could be reversed in the next few months.”

A separate report from the Federal Reserve showed that U.S. factories produced more business equipment and construction materials last month. That boosted manufacturing output 0.4 percent last month and followed a decline in April, the first after 10 months of increases.