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Inflation slowed more than expected in May, a welcome sign for the Federal Reserve even as prices remained uncomfortably high for millions of Americans.
The Labor Department said Wednesday that the consumer price index, a broad measure of how much everyday goods like gasoline, groceries and rent cost, was unchanged in May from the previous month. Prices climbed 3.3% from the same time last year. Both of those figures are lower than the 0.1% monthly increase and 3.4% headline gain forecast by LSEG economists.
Another data point that measures underlying inflationary pressures within the economy also moderated last month. So-called core prices, which exclude the more volatile measurements of gasoline and food in order to better assess price growth trends, increased 0.2% in May. From the same time last year, the gauge climbed 3.4% — the lowest reading since 2021.
Altogether, the report indicates that inflation is loosening its stranglehold on the U.S. economy, though prices remain well above the Fed's 2% target.
High inflation has created severe financial pressures for most U.S. households, which are forced to pay more for everyday necessities like food and rent. Price hikes are particularly devastating for lower-income Americans, because they tend to spend more of their already-stretched paycheck on necessities and therefore have less flexibility to save money.
Housing costs were once again the biggest driver of inflation last month, accounting for more than two-thirds of the total monthly increase, according to the report. Rent costs rose 0.4% for the month and are up 5.3% from the same time last year. Rising rents are concerning because higher housing costs most directly and acutely affect household budgets.
The increase in rent offset a sharp drop in gas prices, which tumbled 3.6% over the course of May – the first decline since January.
Consumers also saw a pick-up in food prices, which have been one of the most visceral reminders of inflation for many households. The cost of food rose 0.1% over the course of the month. Although grocery prices were unchanged in May, the price of food away from home jumped 0.4%.
A customer shops at a Safeway store on June 11, 2024 in Mill Valley, California. (Photo by Justin Sullivan/Getty Images / Getty Images)
This is a developing story. Please check back for updates.
