U.S. consumer price index falls sharply in May (by Jeffry Bartash)

WASHINGTON (MarketWatch) - U.S. consumer prices fell 0.3% in May to mark the biggest decline in three and a half years, as the cost of gas fell sharply, the Labor Department reported Thursday. The gas index sank 6.8%, the largest drop since December 2008. So-called core prices, which strip out volatile food and energy costs, rose a seasonally adjusted 0.2% last month. Economists surveyed by MarketWatch had forecast a 0.2% decrease in the main CPI but a 0.2% hike in the core rate. Consumer prices have risen an unadjusted 1.7% over the past 12 months, down from 2.3% in April. The core rate has increased 2.3% over the past 12 months, the same as in April. The government also reported that inflation-adjusted hourly wages, on average, climbed 0.3% in May. A 0.1% increase in average hourly earnings, combined with the 0.3% drop in the cost of living, accounted for the gain.