United States inflation rose less than expected in May, with falling energy and vehicle prices offsetting rent increases, as the anticipated impact of tariffs under President Donald Trump’s trade policy has yet to significantly filter through.
The Bureau of Labor Statistics reported on Wednesday that the consumer price index (CPI) edged up 0.1% on the month, putting the annual inflation rate at 2.4%.
Markets expected a monthly gain of 0.2%, and an annual increase of 2.5%.
Excluding food and energy, core CPI also came in softer than anticipated - rising just 0.1% on the month and 2.8% over the year. Analysts were looking for 0.3% and 2.9%, respectively.
ANZ commented in a note to clients, “It was expected that early signs of tariffs would have driven a rise in inflation in May. However, the softer-than-expected CPI data suggest that businesses are holding back from passing higher tariffs on to consumers.”
Energy prices were a key drag on the index, falling 1% in May. Gasoline prices dropped 2.6% for the month, natural gas decreased 1%, while electricity increased 0.9%.
New and used vehicle prices also retreated, down 0.3% and 0.5%, respectively. Apparel prices fell 0.4%.
Shelter costs continued to climb, rising 0.3% in May, and were the “primary factor” behind the modest overall CPI increase, according to the BLS.
The annual rise in shelter prices, however, slowed to 3.9% - the weakest pace since late 2021.
Food prices also rose by 0.3% on the month. Notably, egg prices declined 2.7% but remained sharply higher on a yearly basis, up 41.5%.
Despite the subdued inflation figures, several major retailers including Walmart, Lululemon, and J.M. Smucker have all announced plans to raise prices in the coming months, as the full effects of recent tariffs take hold.
Several Federal Reserve officials have also raised concerns about inflationary risks posed by Trump’s trade policy, although the latest data may give the central bank temporary breathing room.
