U.S. Inflation at Lowest Level in Over Two Years

The cost of goods and services for U.S. consumers continued to cool in May, easing for the 11th consecutive month amid higher interest rates imposed by the Fed. Consumer price increases are retreating from decade highs, but a strong labor market and resilient consumer spending have continued to put upward pressure on prices. The Consumer Price Index (CPI) for All Urban Consumers, a measure of price changes commonly referred to as the inflation rate, registered at 4% in the year-ending May 2023, the lowest level since March 2021, according to the Bureau of Labor Statistics. That was slightly below economists’ expectations of 4.1% and well below April’s 4.9% annual gain. In addition, inflation has cooled considerably since reaching a peak of 9.1% last June, which was the biggest year-over-year jump in prices since November 1981. Still, inflation has been well above the Fed’s target rate of 2% annually – the pre-pandemic norm. Excluding volatile food and energy prices, the core CPI increased 5.3% during the year-ending May, down from the 5.5% annual increase in April. Looking at other indexes, shelter, which accounts for about one-third of the total CPI index, saw an 8% year-over-year price surge in May, still registering as one of the biggest annual gains in the past 40 years. Meanwhile, the cost of food was up 6.7% over the past year. And new vehicles posted an annual price increase of 4.7%. Contributing to the lower inflation rate, the cost of energy dropped 11.7% year-over-year in May, with the cost of gasoline (-19.7%) having a big impact on that decline. The price of used cars and trucks (-4.2%) was also down on an annual basis. Airline fares, which saw huge price jumps in 2022 through early 2023, fell 13.4% in the year-ending May.