Inflation (CPI)

NEW YORK (CNNMoney.com) -- A key index of prices paid by consumers showed the largest year-over-year decline since April 1950, primarily due to sinking energy prices, the government said Wednesday.

The Consumer Price Index, the Labor Department's key measure of inflation, has fallen 1.3% over the past year.

That's the largest decline in nearly 60 years, and is due mainly to a 27.3% decline in the energy index.

On a monthly basis, CPI rose 0.1% in May, after remaining flat the previous month. Economists surveyed by Briefing.com expected a 0.3% increase.

Core CPI: The even more closely watched core CPI, which excludes volatile food and energy prices, increased 1.8% on an annual basis.

Core CPI rose 0.1% in May compared with April, matching forecasts. It was restrained by rent costs, which rose only 0.1% -- the smallest increase since November 2004, according to Ian Shepherdson, economist at High Frequency Economics.

"Overall, core is subdued," Shepherdson wrote in a research note. "Expect further slowing ahead."

A related Tuesday report showed wholesale prices jumped slightly in May, but the the 5% annual rate of decline was the sharpest since 1949. Both reports seemed to allay fears of inflation and deflation in the short-term.

Energy: The energy index slipped 27.3% on an annual basis. It climbed 0.2% in May after declining the previous two months.

The gasoline index rose just 3.1% in May - "much less than we expected," Shepherdson wrote.

The mild rise in the gasoline index "merely delays the inevitable," Shepherdson warned, adding that he expects a double-digit increase in June.

Prices at the pump have increased for 50 straight days, rising 30.8% during that period, according to a separate survey for motorist group AAA.

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Index-by-index: The indexes for shelter, new and used motor vehicles, and medical care also posted increases in May.

Many other indices slipped. The food index decreased for the fourth consecutive month with a decline of 0.2%.

The tobacco and smoking products index fell 0.3% in May after rising sharply in the two months prior. The increase in March and April was due to an increase in the federal tax.

The indexes of public transportation and apparel also fell.