May’s Consumer Price Index (CPI) report showed inflation pressures eased on a monthly basis as investors closely watch for any signs that President Trump’s tariffs are impacting what consumers pay.
The latest data from the Bureau of Labor Statistics showed that the Consumer Price Index (CPI) increased 0.1% month over month, below April’s 0.2% rise and a beat compared to economists’ estimates of a 0.2% monthly gain in prices.
Yearly CPI rose 2.4% in May, a slight uptick from April’s 2.3% uptick, which marked the lowest yearly increase since February 2021.
On a “core” basis, which excludes volatile food and energy costs, CPI rose 2.8% over the past year in May, matching April. Monthly core prices increased 0.1%, a touch below April’s 0.2% gain. Heading into the report, economists had expected core CPI to rise 2.9% year over year and 0.3% month over month.
Declines in car and apparel prices, categories expected to show some of the earliest impacts from tariffs, helped drive a cooler-than-expected core CPI reading last month.
The report reflects the time period about a month after Trump’s “Liberation Day” tariff announcements shook markets and businesses. Since then, many of those “reciprocal” tariffs have been paused, but the 10% baseline duties for most countries remain in place.
Mexico and Canada continue to face fentanyl-related tariffs, and industry-specific tariffs on steel, aluminum, and autos remain unchanged. Tariffs on China are still significant even as a truce temporarily pauses big hikes, with the effective tariff rate on Chinese goods hovering around 30%.
Early Wednesday, the US and China agreed to a framework and implementation plan aimed at easing tariff and trade tensions. President Trump signaled his approval, saying the deal was “done,” pending final sign-off from him and Chinese President Xi Jinping.
Core inflation has remained stubbornly elevated due to sticky costs for shelter and services like insurance and medical care. The shelter index rose 3.9% over the last year and 0.3% over the prior month in May. It was the primary factor in the all items monthly increase, according to the BLS.
The index for rent and owners’ equivalent rent (OER) rose 0.2% and 0.3%, respectively, over the prior month. Owners’ equivalent rent is the hypothetical rent a homeowner would pay for the same property.
Still, there were signs of easing within shelter. Lodging away from home, for instance, fell 0.1% in May.
Outside of shelter, the downside surprise in core inflation was also aided by other categories, including a drop in airline fares, used cars and trucks, new vehicles, and apparel.
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