Key Inflation Gauge Rises as Americans Cut Back on Spending
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WASHINGTON — A key inflation gauge moved higher in May in the latest sign that prices remain stubbornly elevated while Americans cut back on their spending.
Prices rose 2.3% in May compared with a year ago, up from just 2.1% in April, the Commerce Department said June 27. Excluding the volatile food and energy categories, core prices rose 2.7% from a year earlier, an increase from 2.5% the previous month. Both figures are modestly above the Federal Reserve’s 2% target.
At the same time, Americans cut back on spending for the first time since January, as overall spending fell 0.1%.
The inflation figures suggest that President Donald Trump’s broad-based tariffs are still having only a modest effect on prices. The costs of some goods, such as toys and sporting goods, have risen, but those increases have been partly offset by falling prices for new cars, airline fares, and apartment rentals, among other items.
Inflation came in fairly mild in May. PCE inflation ticked up only 0.1% in May to an annual rate of 2.3% (up from 2.2% in April).
We're all waiting for more signs of tariffs raising prices, but it's been mild so far.
The bigger surprise?
Personal incomes and consumption FELL… — Heather Long (@byHeatherLong)
On a monthly basis, in fact, inflation was mostly tame. Prices rose just 0.1% in May from April, according to the Commerce Department, the same as the previous month. Core prices climbed 0.2% in May, more than economists expected and above last month’s 0.1%.
The weakness in spending in part likely reflects reduced purchases of cars and other manufactured goods after Americans stepped up their spending on those items this spring to get ahead of tariffs.
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