Annual inflation rates slightly rose in May compared to the previous year's figures.
KraneShares Chief Investment Officer Brendan Ahern dished on Chinese stocks, inflation rates, and more on 'The Claman Countdown.'
In May, inflation showed a minor uptick, lingering slightly above the Federal Reserve's target rate before their upcoming meeting this month.
According to the Bureau of Labor Statistics' report on Wednesday, the Consumer Price Index (CPI) - a comprehensive measure of the cost of everyday goods such as gasoline, groceries, and rent - edged up 0.1% compared to last month. Year-over-year, the CPI experienced a 2.4% increase.
These figures were milder than economists' projections based on data polled by LSEG. The annual CPI improvement from 2.3% the previous month was slightly more notable. Core prices, excluding more volatile measurements of gasoline and food, increased 0.1% from the prior month and 2.8% on an annual basis, moderately below economists' estimates.
Job Growth Slows Amid Economic Uncertainty
The report also revealed that inflationary pressures in the U.S. economy persist despite progress in bringing inflation closer to the Federal Reserve's 2% target in recent years. High inflation creates severe financial strains for most U.S. families, as they face increased costs for necessities like food and rent. Price hikes particularly burden lower-income Americans, as they tend to spend a larger portion of their income on essentials and have less room to save money.
Food prices, for example, were 0.3% higher in May and 2.9% greater on an annual basis. The food at home index increased 0.3% and the food away from home index escalated 2.2% on an annual basis. Egg prices dropped 2.7% in May, as the cooling trend continued following the industry's rapid price growth last year due to an avian flu outbreak, leaving prices 41.5% higher than a year ago. The index for meats, poultry, and fish, as well as the dairy index, each fell 0.1% in May, while the fruits and vegetables index jumped 0.3% and the cereals and bakery products index escalated 1.1% for the month.
Energy Prices Decrease
Energy prices dropped by 1% in May after increasing 0.7% in April. The gasoline index slid 2.6% in May and is currently 12% lower than a year ago, while electricity prices advanced 0.9% for the month and are up 4.5% compared to last year.
Housing prices increased 0.3% last month, accounting for the overall CPI ascent. Over the past 12 months, the shelter index grew by 3.9%. Transportation costs dwindled 0.2% last month but have risen 2.8% over the past year. Airline fares dropped 2.7% in May and are 7.3% lower over the past year, while motor vehicle insurance prices rose 0.7% last month and are 7% higher than a year ago.
The lesser-than-expected inflation data comes before the Federal Reserve's meeting next week, where the central bank is expected to maintain interest rates steadily amid uncertainty about economic conditions. Economists predict that consumer prices will surge due to President Trump's tariffs, which remain delayed and therefore have yet to have a substantial impact on inflation data.
Eric Teal, chief investment officer for Comerica Wealth Management, stated, "Despite persistent inflation, tariffs have not shown up in consumer prices, but it depends on the absorption rate of U.S. companies and foreign suppliers. We believe that the majority of the tariffs will eventually be passed on to consumers, but companies are cautious at this juncture about passing along the price increase."
Seema Shah, chief global strategist at Principal Asset Management, added, "Although the cool inflation data offers some relief, the impact of tariffs is still a concern in the near future. Tariff-driven price increases may not manifest in the CPI data for a few more months."
[1] Consumer Price Index (CPI) Definition (Investopedia)[2] May 2025 Consumer Price Index (U.S. Bureau of Labor Statistics)[3] Trading Economics: U.S. Consumer Price Index[4] The Federal Reserve's 2% Inflation Target Explained (Investopedia)[5] Mixed Economic Data Keeps Investors Guessing on U.S. Growth (PBS Newshour)
- Despite several factors impacting different sectors, the Consumer Price Index (CPI) mildly increased by 0.1% in May, with some categories, such as food and energy, experiencing a decrease.
- The increase in the CPI year-over-year (2.4%) was below economists' projections, but food prices were up 2.9% compared to last year, as essential food products like meats, dairy, fruits, and vegetables became more expensive.
- The lesser-than-expected inflation data might influence the Federal Reserve's meeting next week, as economists anticipate continued interest rates and await the impact of tariffs on consumer prices.
- Eric Teal, chief investment officer for Comerica Wealth Management, suggests that while tariffs have yet to significantly affect consumer prices, they will likely be passed on to consumers as U.S. companies and foreign suppliers absorb the costs for now.
- Seema Shah, chief global strategist at Principal Asset Management, indicates that although the recent inflation data offers temporary relief, tariff-driven price increases may not appear in the CPI data for several more months. These factors create uncertainty in the economy, making it challenging for businesses and investors to forecast future trends.
