Consumer prices rose lower than expected in May as President Donald Trump’s tariffs had not yet had a major impact on inflation, the Bureau of Labor Statistics reported Wednesday.
The Consumer Price Index, a measure of wide range of goods and services across the vast US economy, rose 0.1% that month, bringing annual inflation to 2.4%. Economists surveyed by Dow Jones were looking for measurements of 0.2% and 2.4% respectively.
Excluding food and energy, the core CPI was 0.1% and 2.8%, respectively, compared to the 0.3% and 2.9% forecasts. Federal Reserve officials consider their core a better measure of long-term trends that have recently raised some concerns about the impact of tariffs on inflation.
The annual rate for all items was stepped up by 0.1 percentage points from April, but the core was the same.
The continued weakening of energy prices helped to offset some of the increase, with several other important items that are expected to actually list tariff-related jumps, vehicles and apparel prices in particular.
Energy slipped 1% that month, but new and used car prices recorded a 0.3% and 0.5% decline, respectively. Within energy range, gasoline recorded a 2.6% decline, bringing a year-on-year decline to 12%.
Like Shelter, food rose 0.3%. Egg prices fell 2.7%, but still had a 41.5% increase from a year ago. Apparel posted a 0.4% drop.
Shelter prices rose that month, but the 3.9% annual increase since late 2021 is the lowest percentage.
A slight inflation movement led to an actual average hourly profit margin increased by 0.3% that month, up 1.4% from a year ago.
“Today’s below predicted inflation printing is encouraging, but only to some extent,” said Sheemasher, Chief Global Strategist of Principal Asset Management. “Tax-driven price increases are too early to assume that a price shock will not be realized, as the tariff-driven price increases may not be sent to CPI data for more months.”
Stock market futures were positive after the report, but the Treasury yields were lower.
In a post on X, reflecting Vice President JD Vance’s Trump, he called on the federal government to cut interest rates as inflationary pressures did not come into effect.
“The president has been saying this for a while, but that’s even more clear: the Fed’s refusal to cut interest rates is a financial malpractice,” writes Vance.
Trade tensions continue
The BLS report comes along with the Trump administration’s continued efforts to negotiate trade deals. In an announcement of the “liberation day” on April 2 that shook financial markets, Trump slapped a 10% universal duty on many other so-called mutual tariffs on countries that he said were using US imports and unfair trading practices.
Recently, White House officials met with Chinese leaders to ease the fierce trade war between the two countries. Leaders from both countries say it is close to agreements on rare earth materials, including batteries and technology-related items related to automobiles.
Other countries were hit hard by mutual obligations, according to a announcement made a week after the first move.
White House officials argue that tariffs do not cause runaway inflation, and expect foreign producers to absorb much of their own costs. However, many economists believe that the broad nature of their duties can raise prices in a more pronounced way, and that there is a high possibility of a major impact by summer as inventory accumulates prior to the implementation of tariffs.
“We’re committed to providing a range of services to our customers,” said Alexandra Wilson-Elizondo, global CIO of Multi-Asset Solutions at Goldman Sachs Asset Management. “The price of the item may increase later, but service prices are expected to remain stable, suggesting that the rise in inflation is likely to be temporary.”
Market prices indicate that it is unlikely that the Fed will consider further interest rate cuts until at least September, as policymakers assess the impact of tariffs on inflation. Trump has urged the Fed to lower rates amid signs of ease and slowing down in the labor market.
Changes to data collection
Evaluation of inflation numbers has been complicated by other Trump initiatives.
To cut the federal workforce, the administration has enacted a job freeze that is consistent with the BLS, which limits data collection and expands the process known as Input. For example, BLS said last week that it had “cut samples across regions across the country” as of April, and that it had completely stopped its collection in Lincoln, Nebraska. Provo, Utah; Buffalo, New York.
“Given the continued lack of staffing in BLS, the use of extended assignments may continue. It is difficult to conclude any kind of directional effects, but if the sample size is small, you may be responsible for greater volatility,” an analyst at BNP Paribas said in a memo.
However, BLS says that the movement to pause collections has a “minimal impact” on the overall data collection, but it can affect subindexes.
Fix: JD Vance is Vice President. Previous versions spelled his name wrong.
