Inflation increased 0.1 percent in May, less severe than previous months: CEI analysis

Today, the Consumer Price Index report for May showed inflation increased across all sectors by 0.1 percent, compared to 0.2 percent in April. CEI senior economist Ryan Young says stable Federal Reserve policy and business strategies aimed at protecting consumers from tariff costs contributed to a good inflation report.

“Overall CPI growth slowed to a nice-looking 0.1 percent last month, but most of it is due to falling energy prices. Tariffs are still doing visible damage in other sectors. Food and housing prices both increased at triple last month’s inflation rate.

“Gas prices are down 12.0 percent over the last year, which is always welcome news. Electricity rates, however, are up 4.5 percent over the last year. Nearly all of the increase has come in the last four months, just as peak summer air conditioning season hits.

“Why is the CPI in good overall shape? One reason is stable policy from the Federal Reserve. Another is that many businesses are doing what they can to avoid passing their tariff costs on to consumers. This is showing in two months of slower hiring since Liberation Day, and in lower returns to people’s retirement accounts.

“People can pay for tariffs at the cash register, or they can pay for them in lost job opportunities and lower investment returns. They still pay the tariff costs, even if not all the payment methods show up in the CPI.

“Some companies stockpiled as many supplies as they could before tariffs hit and are living off of that. Other companies are hoping to wait out the tariffs, hoping that courts and Congress will limit presidential taxing power. Consumer spending went down in May. This indicates that some people are holding off on purchases, which helps to contain price increases.”