US inflation accelerates, though core gauge comes in softer
Prices of household essentials, aside from petrol, rose at a more muted pace in May
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US INFLATION accelerated again in May as the Iran war pushed up energy prices, though a gauge of underlying inflation rose by less than forecast.
The consumer price index climbed 4.2 per cent from a year earlier, the most since early 2023, according to Bureau of Labor Statistics data out on Wednesday (Jun 10).
The core CPI, which excludes food and energy, increased 0.2 per cent from April and 2.9 per cent from a year earlier.
Despite an energy-fuelled jump in the overall CPI, the details of the report painted a milder picture: Transportation services, health insurance and new vehicles prices fell. That represents cold comfort for consumers who are already facing higher prices that are eating into pay cheques.
Even if there’s a resolution to the conflict soon, economists see more price increases on the horizon, which could prompt Federal Reserve officials to consider an interest-rate increase this year.
Beyond the initial energy shock, disruptions to fertiliser markets may eventually lead to higher grocery bills, while rising transportation costs could boost prices for all kinds of consumer goods.
S&P 500 futures pared losses after the release.
The CPI report showed prices of household essentials, aside from petrol, rose at a more muted pace in May. Grocery prices rose 0.1 per cent, while energy services costs, a category which includes utilities prices like electricity and natural gas, also advanced at a slower pace. Petrol climbed 7 per cent.
A separate report on Wednesday that combines the inflation figures with recent wage data showed that real average hourly earnings fell 0.7 per cent from a year earlier, the biggest drop in more than three years.
The combination of higher prices and weaker pay gains is putting more stress on household budgets at a time when consumer sentiment is already at record lows, and will likely be front and centre in November’s midterm elections.
President Donald Trump’s approval ratings have slumped as Americans have soured on his handling of the economy, which he had previously counted as an area of strength. BLOOMBERG
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