Inflation slows in May, with consumer prices up 3.3% from a year ago

The consumer price index showed no increase in May as inflation slightly loosened its stubborn grip on the U.S. economy, the Labor Department reported Wednesday.

The CPI, a broad inflation gauge that measures a basket of goods and services costs across the U.S. economy, held flat on the month though it increased 3.3% from a year ago, according to the department's Bureau of Labor Statistics.

Economists surveyed by Dow Jones had been looking for a 0.1% monthly gain and a 3.4% annual rate. The monthly rate rose 0.3% in April while the annual rate was 3.3%.

Excluding volatile food and energy prices, core CPI increased 0.2% on the month and 3.4% from a year ago, compared with respective estimates of 0.3% and 3.5%.

Following the report, stock market futures pushed higher while Treasury yields slid. The Dow Jones Industrial Average rose about 250 points in morning trade while the 10-year Treasury yield fell to 4.27%, down nearly 0.14 percentage point.

Though the top-line inflation numbers were lower for both the all-items and core measures, shelter inflation increased 0.4% on the month and was up 5.4% from a year ago. Housing-related numbers have been a sticking point in the Federal Reserve's inflation battle and make up a heavy share of the CPI weighting.

Price increases were held in check, though, by a 2% drop in the energy index and just a 0.1% increase in food. Within the energy component, gas prices tumbled 3.6%. Another nettlesome inflation component, motor vehicle insurance, saw a 0.1% monthly decline though was still up more than 20% on an annual basis.

"Finally, some positive surprises as both headline and core inflation beat forecasts," said Robert Frick, corporate economist with Navy Federal Credit Union. "There was relief