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U.S. Inflation Hits 4.2% as Energy Prices Jump
Gasoline Rose 7% in May, While Core CPI Increased Less Than Forecast
Key Takeaways:
- U.S. CPI rose 4.2% year over year in May, the most since early 2023, as energy prices climbed.
- Core CPI increased 0.2% from April and 2.9% annually, while gasoline jumped 7% and real hourly earnings fell 0.7%.
- Pressure on household budgets likely will be central in November’s midterm elections.
U.S. inflation accelerated again in May as the Iran war pushed up energy prices, though a gauge of underlying inflation rose less than forecast.
The consumer price index climbed 4.2% from a year earlier, the most since early 2023, Bureau of Labor Statistics data showed June 10. The core CPI, which excludes food and energy, increased 0.2% from April and 2.9% from a year earlier.
S&P 500 futures pared losses after the release.
The CPI report showed prices of household essentials, aside from gasoline, rose at a more muted pace in May. Grocery prices rose 0.1%, while energy services costs, a category that includes utility prices such as electricity and natural gas, also advanced at a slower pace. Gasoline climbed 7%.
A separate report June 10 that combines the inflation figures with recent wage data showed that real average hourly earnings fell 0.7% from a year earlier, the biggest drop in more than three years.
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The combination of higher prices and weaker pay gains is putting more stress on household budgets at a time when consumer sentiment is already at record lows, and will likely be front and center in November’s midterm elections. President Donald Trump’s approval ratings have slumped as Americans have soured on his handling of the economy, which he had previously counted as an area of strength.
Despite an energy-fueled jump in the overall CPI, details of the report painted a milder picture: Transportation services, health insurance and new-vehicle prices fell. That represents cold comfort for consumers who already are facing higher prices that are eating into paychecks.
