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Key Takeaways
- Inflation rose less than expected in May, with prices increasing 2.4% over the year in May compared to a 2.3% increase in April.
- “Core” inflation, which excludes food and energy prices, was up 2.8%, the same as in April.
- Forecasters had expected tariffs to push up prices for things like clothes and cars, but that didn’t happen: those prices actually fell.
- The inflation increase was mainly due to housing costs.
Inflation rose in May, but there were few signs of widespread tariff-related price increases forecasters have been expecting.
The Consumer Price Index rose 2.4% over the last 12 months in May, up from a 2.3% annual increase in April, the Bureau of Labor Statistics said Wednesday. It was the first time in four months that year-over-year inflation had risen. Rising housing costs pushed inflation up, while falling gas prices kept it from rising more than it did.
“Core” inflation, which excludes volatile prices for food and energy, rose 2.8% over the year, the same as in April. Forecasters had expected core inflation to rise 2.9% annually, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal.
The report showed that President Donald Trump’s widespread tariffs on imports were having less impact on consumer prices in May than economists had expected. Prices for goods other than food and energy, the category with the most heavily-tariffed items, were up only 0.1% for the month. Prices for new cars fell 0.3% over the month despite foreign cars being subject to a 25% tariff. Clothing prices fell 0.4% over the month, even though most clothing is made abroad and subject to tariffs.
“There is little evidence of tariff-induced inflation in May’s report,” Matt Colyar, an economist at Moody’s Analytics, wrote in a commentary.
Stockpiles To The Rescue?
The data suggested companies have been able to avoid passing tariff costs along to customers at least for the time being, possibly because they stockpiled inventory earlier in the year, before the tariffs hit, Alexandra Wilson-Elizondo, global co-CIO of Multi-Asset Solutions in Goldman Sachs Asset Management, wrote in a commentary.
“Tariffs aren’t having a large immediate impact because companies have been using existing inventories or slowly adjusting prices due to uncertain demand,” she wrote. “While we might see some price increases on goods later, service prices are expected to remain stable, suggesting any rise in inflation is likely to be temporary.”