But core inflation holds steady at 2.8%
The annual rate of inflation as measured by the Consumer Price Index (CPI) rose to 2.4% in May, marking the first increase since January.
The 2.4% 12-month rise is up from 2.3% in April. The inflation rate had dropped for three straight months since hitting 3.0% in January. Also, the 2.4% increase is in line with economists’ expectations.
For the month of May, inflation rose 0.1%, which was better than the expected 0.2% increase.
Core inflation, which excludes food and energy prices, rose 2.8% over the past 12 months. That is the same as last month and better than the 2.9% rate that economists anticipated.
May was the first full month that the new tariffs were in place, so they likely had an impact, but they appeared to be minimal as retailers and service providers made efforts to keep price hikes in check.
Food prices rise
Food prices increased 0.3% in the month of May, up from a -0.1% decline in April. Overall, food prices increased 2.9% since May 2024, which is up from 2.8% last month.
The prices for both food at home (groceries) and food away from home (dining out) jumped 0.3% in May. Food at home prices have increased 2.2% year over year, up from 2.0% last month, while food away from home prices rose 3.8% — the same as last month.
Three of the six major grocery store food group indexes increased in May, with the cereals and bakery products index rising 1.1% and the fruits and vegetables index jumping 0.3%. Further, the index for meats, poultry, fish, and eggs fell 0.4% in May. The index for eggs decreased 2.7%. Also, the nonalcoholic beverages index declined 0.3% last month while the dairy and related products index decreased 0.1%.
For food away from home, the indexes for both full-service meals and limited-service meals each rose 0.3%.
Energy prices continue to fall, dropping 1% in May and falling 3.5% over the past 12 months. Gas prices are down 12% since last May while oil prices have dropped 8.6%. Natural gas utility prices fell 1% in May but are still up 15.3% from last May. Electricity costs rose 0.9% last month and are up 4.5% year over year.
Airfares keep dropping
The index for shelter rose 0.3% in May, the same as the previous month. Shelter prices have increased 3.9% over the past 12 months. The index for owners’ equivalent rent rose 0.3% in May while the index for rent increased 0.2%. In addition, lodging away from home dropped 0.1% last month.
In other areas, new car prices dropped 0.3% last month and are up just 0.4% year over year. Used car prices fell 0.5% in May and are up 1.8% since last May. Apparel prices dropped 0.4% for the month and are down 0.9% over the past year.
Also, airline fares keep dropping, down another 2.7% in May after dropping 2.8% in April.
In addition, medical care commodities prices increased 0.6%, up from 0.4% the previous month. But they are up just 0.3% over the past 12 months. Medical care services rose 0.2% in May and are up 3% since last May.
Further, the motor vehicle insurance index rose 0.7%, household furnishings and operations increased 0.3%, the personal care index increased 0.5%, recreation climbed 1.8%, and the education index rose 0.3%.
Markets were mostly up on Wednesday, although the gains were small with the Dow up just 60 points, the Nasdaq rising 54 points, and the S&P 500 up 12 points.
The results basically confirmed to interest rate traders that rates will stay the same next week when the FOMC meets. Some 99.9% expect the Fed to maintain rates where they are next week, up from 97.3% just yesterday, according to CME FedWatch. And the 0.1% that thinks rates will change next week say they will go up 25 basis points, not down.
