May CPI Unchanged, Energy Prices Drop; Core CPI Falls to 3-Year Low
In May, the headline Consumer Price Index (CPI) showed no change month-over-month (MoM), marking the smallest shift since July 2022 and slightly below the anticipated +0.1% MoM increase. On a year-over-year (YoY) basis, headline CPI rose by 3.3%, just under the expected 3.4%, yet it remains significantly above the 2% target for over a year.
Energy significantly impacted the headline CPI for the month. A notable 3.6% drop in gasoline prices from April was a key reason for the unchanged headline CPI in May.
Core CPI increased by 0.2% MoM, which was lower than the expected 0.3%, bringing the YoY change down to 3.4% from 3.6% and below the anticipated 3.5%. This is the lowest YoY rise in Core CPI since April 2021. Core CPI hasn't decreased in any month since President Biden took office.
Core services inflation saw a notable slowdown MoM. The shelter index, which rose by 0.4% in May, was the largest contributor to the monthly increase in the all-items index excluding food and energy. Shelter inflation was at 5.41% YoY in May, down from 5.55% in April, the lowest since April 2022. Rent inflation was at 5.30% YoY in May, down from 5.44%, marking the lowest since May 2022. Housing costs are crucial to U.S. inflation data, with the shelter index rising 5.4% over the past year, accounting for over two-thirds of the total 12-month increase in the all-items less food and energy index.
Services inflation remains stuck above 5%, while goods deflation is at its weakest since January 2004. The SuperCore CPI fell by 0.05% MoM, its first drop since September 2021, though the YoY level remains above 5%. Transportation services costs fell MoM, contributing to the decrease in SuperCore MoM.
Consumer prices have not fallen in a single month since President Biden's term began. The closest to a decline were July 2022 and May 2024, when the index was unchanged. Overall prices have increased by over 19.5% since the start of Biden's presidency, averaging a 5.4% annual rise, nearly triple the 1.9% annual increase during President Trump's term. Since Biden's election, food prices at home have risen by around 21% and by almost 23% away from home.
Finally, despite the general decline in inflation tracking with M2 money supply, M2 YoY is beginning to rise again.
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