What The CPI Inflation Numbers Mean For The Future

The Consumer Price Index numbers for May came out on Wednesday. The seasonally adjusted number was up 0.1% in May, a drop from April’s 0.2%. except for March, it was the lowest monthly inflation figure since July 2024.

Over the last 12 months, inflation was 2.4% before seasonal adjustment. There is volatility over time, but also a downward trend line, even if it hasn’t dropped fast enough for people’s tastes. Below is a graph from the Federal Reserve Bank of St. Louis, showing year-over-year comparisons.

The news was good, at least in theory and at a high level. At a more detailed look, perhaps not. Other issues — tariffs, rising deficit spending, and spending cuts for important common good activities — combine with inflation to create greater uncertainty in the near future and the potential for a recession.

Here Are The CPI Details That Affect You

CPI at the headline level sounds good. Details are, on the whole, more discouraging. Here are some product categories where inflation was much higher:

• Utility gas: +15.3%
• Beef and veal: +8.6%
• Eggs: +41.5%
• Coffee: +11.5%
• Sugar: +4.1%
• Food at employee sites and schools: 3.9%
• Women’s outerwear: +6.0%
• Educational books and supplies: +9.4%
• Computer software and accessories: +6.1%
• Tobacco and smoking products: +6.3%
• Motor vehicle repair: +7.4%
• Motor vehicle insurance: +7.0%
• Electricity Inflation: +4.5%
• Rent of primary residence: +3.8%
• Food away from home: +3.8%
• Medical care services: +3.0%
• Hospital services: +3.6%
• Pet services including veterinary: +4.9%
• Admissions to movies, theaters, and concerts: +4.7%
• Personal care services: +3.9%
• Laundry and dry cleaning services: +3.6%

All are necessities, if not for everyone, for many millions. Other items helped keep the headline inflation down:

• Gasoline: -12.0%
• Fuel oil: -8.6%
• Smartphones: -14.3%
• Hot dogs: -5.3%
• Lettuce: -6.2%
• Tomatoes: -6.8%
• Frozen vegetables: -5.0%
• Dishes and flatware: -5.8%
• Men’s shirts and sweaters: -4.1%
• Women’s dresses: -3.8%
• Infants’ and toddlers’ apparel: -4.7%
• Televisions: -9.8%
• Sporting goods: -4.7%
• Leased cars and trucks: -3.7%
• Public transportation: -5.4%
• Airline fares: -7.3%

The moderating factors don’t necessarily remove the burden of the items with greater inflation, depending on how households spend and experience inflation.

Near Future Effects On Inflation

“Shelter and energy are going to keep the disinflation trend intact,” wrote Jamie Cox, managing partner for Harris Financial Group, in a note. “Prices are moving down in two of the largest categories, so investors should expect further declines in inflation in the coming months.

“However, CPI remains above 2% and even though the tariff rates are going to be less than originally feared, after they are implemented, they will further increase the cost of goods,” wrote Chris Zaccarelli, chief investment officer for Northlight Asset Management, in a second note. “Because of this and the tariff pause that’s scheduled to be lifted next month, we are still cautious, but many of the risks that were present in early April, appear to be receding at this time.”

As Oxford Economics noted, the May CPI data have been “encouraging, but unlikely the new norm.”

For example, the administration announced a temporary trade truce — again — with China following talks in London. This time, tariffs will be 55%. That’s a blended number and includes 20% tariffs on fentanyl, a 10% reciprocal tariffs, and then an average 25% for tariffs already in place before this year, according to a MarketWatch report.

The congressional spending bill is likely going to send spending and the deficit up, which will also provide inflationary pressure. While the headline numbers sound like a reprieve, it probably won’t be ultimately.