US May CPI Hits 4.2%, Highest Since April 2023

Clear Impact from the War... Gasoline Prices Up 7%

Core Inflation Excluding Energy and Food at 2.9%

Products are displayed at a supermarket located in New York. New York, USA – Photo by Yoonju Hwang

The U.S. Consumer Price Index (CPI) for May rose above 4%, marking the highest inflation rate since April 2023. The aftermath of the Iran war led to a sharp surge in energy prices, which in turn pushed up overall inflation. However, the core CPI—which excludes the more volatile food and energy categories—came in below expectations, leading some observers to suggest that concerns over a broader spread of inflation have somewhat eased.

The U.S. Department of Labor announced on June 10 (local time) that the May CPI increased by 4.2% year-on-year. This is the highest rate in three years and one month. On a month-on-month basis, the index rose by 0.5%.

Energy prices drove the increase in inflation. By category, energy prices climbed 3.9% from the previous month, accounting for 60% of the monthly index rise. Notably, gasoline prices surged by 7.0% compared to the previous month.

The core CPI rose by 2.9% year-on-year and 0.2% month-on-month, falling short of the market forecast of 0.3%. In particular, this marks a significant slowdown from the 0.4% rise seen in April.

The Wall Street Journal (WSJ) noted that the monthly inflation rate decelerated somewhat compared to April, indicating that the sharp rise in energy prices may have peaked. However, this assessment assumes that the slight decline in gasoline prices in June will not be reversed by another sharp increase due to renewed conflict in the Strait of Hormuz.

Housing costs rose 0.3% from the previous month. Both rent and the owners' equivalent rent (OER) index climbed by 0.4% and 0.3%, respectively. Lodging costs, including hotels, also jumped by 0.4%.

In the services sector, airline fares soared by 2.7%. Communication costs increased by 1.3%, and medical services by 0.3%. Food prices rose by 0.2% from the previous month. Food consumed at home increased by 0.1%, while dining out saw a 0.3% rise.

Gregory Daco, Chief Economist at EY-Parthenon, explained, "The longer the Middle East conflict continues, the more likely it is that inflationary pressures will become broader and more persistent. Rising fertilizer prices will fuel higher food prices, while increased transportation and production costs will gradually be passed on to a wider range of goods and services."

This content was produced with the assistance of AI translation services.