Retailers Forced to Stick With Low Prices

Inflation is being kept in check. Good for consumers, not so much for retailers.

The Consumer Price Index rose just 0.1% in May, below analysts' expectations of 0.3% growth, as retailers lock in low prices for fear of losing customers who are tightening purse strings.

The closely watched core CPI, which excludes volatile food and energy prices, rose 0.1% in May, the Labor Department reported.

On a year-over-year basis, the CPI dropped 1.3%, the largest yearly decline since April 1950.

While prices may be holding steady at retailers, the trend is not the same at gas stations. Gasoline prices shot higher by 9.6% in May, before the seasonal adjustment. Still, prices remain much lower than last year, when rates at the pump topped $4 a gallon during the summer. Gas prices reached $2.67 a gallon on Tuesday.

Food prices in the U.S. fell for the fourth straight month in May as costs declined for all six of the major grocery food groups, including fruits and vegetables, meats and poultry, and dairy products.

Lower prices may seem like a good thing, but deflation can also cause consumers to postpone purchases, leading to drops in production and wage cuts.