Announced this morning, the headline Consumer Price Index (CPI) was flat in May, less than expected and three tenths less than last month’s increase. On an annualized basis it grew 3.3%, the same as the annualized figure from the previous month. The core rate, which excludes prices for food and energy, increased 0.2% in May, also less than expected, and grew 3.4% on an annual basis, which is two tenths lower than the annualized figure from the previous month.
Reviewing the individual categories, monthly prices for Medical Care Commodities, up 1.3%, were relatively strong while monthly prices for Gasoline, down -3.6%, Transportation Services, down -0.5%, and New Vehicles, also down -0.5%, were relatively weak. Prices for Shelter were up 0.4%, the same as in previous months.
Overall, a bit of a relief in monthly inflation figures in May as the headline number was flat and core rates came in less than expected. The annual rate for core CPI is two tenths lower than the previous month but remains well above the Federal Reserve’s 2% target. Also considering the tick higher in the unemployment rate to 4% per last week’s jobs report and consumers moderating their spending in some areas per some recent earnings reports, data appear to be slowly adjusting to these trends. How the Fed addresses this dynamic and their policy both today and in the coming weeks will be key for the economy and markets.
In all, the 10-year US treasury yield ticks lower following the report and equity futures are higher as we head into the market open.
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