Early indicators suggest inflation could be stabilizing.
Rising energy prices from the three-month-old war in Iran lifted inflation in May to its highest level in three years.
The U.S. annual inflation rate surged to 4.2 percent last month, from 3.8 percent in April, according to new Bureau of Labor Statistics data released on June 10.
This marks the highest 12-month inflation reading since April 2023.
Core inflation, which strips out the volatile energy and food categories, ticked up to 2.9 percent year-over-year from 2.8 percent in the previous month.
Both readings were in line with economists’ expectations.
On a month-over-month basis, May’s consumer price index rose 0.5 percent, while core edged up by a smaller-than-expected pace of 0.2 percent.
Energy accounted for 60 percent of the monthly increase, unsurprising as the war in Iran—now in its 14th week—continues to impact global oil markets.
The index for energy climbed 3.9 percent from April to May and is up almost 24 percent over the past 12 months. Gasoline jumped 7 percent last month, while fuel oil increased nearly 4 percent. Electricity costs also rose 0.6 percent.
Businesses and consumers dealing with rising energy prices in recent months could see relief.
A barrel of West Texas Intermediate—the U.S. benchmark for oil prices—has stabilized, trading around $90 on the New York Mercantile Exchange.
Gasoline prices have eased in the past month, with the national average falling almost 40 cents to $4.15 a gallon.
“Pump prices are cooling off as the price of crude oil remains below $100 per barrel. Drivers will take all the relief they can get as they embark on summer road trips,” the American Automobile Association said in a June 4 report.
“But uncertainty lingers over when the Strait of Hormuz will fully reopen and resume traffic. That unknown means oil prices will likely not decrease dramatically as summertime gasoline demand starts going up.”
Food prices were little changed in May, rising just 0.2 percent. Supermarket costs ticked up 0.1 percent, and food-away-from-home prices advanced 0.3 percent.
Protein-rich foods eased modestly as the category for meats, poultry, fish, and eggs fell 0.2 percent. This included a 1.6 percent drop for beef and veal, as well as a 0.1 percent dip for chicken.
But egg prices rose for the second consecutive month, surging 4 percent in May.
As President Donald Trump’s trade agenda continues to make its way through the U.S. marketplace, tariff-sensitive items posted mixed data.
The index for new vehicles declined by 0.3 percent, but apparel prices increased 0.3 percent. The information technology commodities category—smartphones, computers and peripherals, and software—slid 0.1 percent. Televisions declined 1.5 percent, appliances advanced 0.5 percent, and canned fruits and vegetables were flat.
Transportation services, a potential indicator for economists to determine whether inflationary pressures are widening throughout the economic landscape, fell 0.6 percent.
By Andrew Moran
