Dive Brief:
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Inflation reached 4.2% last month, the highest in three years, according to the Consumer Price Index released Wednesday by the U.S. Bureau of Labor Statistics.
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Energy prices accounted for more than 60% of May’s spike, per the report.
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Taking out energy and food, consumer prices rose 2.9% year over year, the biggest increase since September.
Dive Insight:
Inflation is up sharply from early in the year, before the Iran war began to push up fuel costs, according to Navy Federal Credit Union Chief Economist Heather Long. Moreover, the rise in consumer prices is outpacing the 3.4% wage growth measured by BLS at the end of April.
Energy prices surged the most year on year. All types of gasoline prices rose 40.5% and fuel oil rose 58.9%. But increases were broad-based, with apparel prices up 4.8%, shelter up 3.4% and electricity up 5.9%.
“The frustration for many Americans is that so many of the basics are up in price right now — gas, food, electricity, and medical care are all clear pain points that are above 3% inflation,” Long said in emailed comments.
Indeed, U.S. consumers’ outlook reached the lowest level in four years, according to the Numerator Consumer Sentiment Tracker. More say their finances will worsen in a year than say they will improve, though half say they’ll remain the same. Sentiment declines spanned generations and ethnicities, Numerator found.
The price index was at the top end of estimates from Bank of America economists, released Wednesday ahead of the BLS report. In their research note they said “most of the tariff-driven inflation has run its course,” but warned that “supply chain pressures are building from the Iran war.”
Consumers may not be able to anticipate much relief even if the war concludes soon, Long said.
“Ending the war in Iran will help to moderate inflation, but the worst is likely still to come for rising food prices,” she said.
