Inflation cooled again in May to the lowest rate in two years, but a spike in the cost of used cars, rent and groceries kept prices uncomfortably high for millions of U.S. households.
The Labor Department said Tuesday the consumer price index rose just 0.1% in May from the previous month, far lower than the 0.4% increase recorded in April. Prices climbed 4% on an annual basis.
Although inflation has cooled from a peak of 9.1%, it remains about more than double the pre-pandemic average and well above the Federal Reserve's 2% target rate.
"Headline inflation dropped while core inflation continued to grind down, but this report contains plenty of pain, especially for lower-income Americans," said Robert Frick, corporate economist with Navy Federal Credit Union. "Higher food and shelter prices pushed up the costs of the top two necessities that take outsized chunks from those with lower incomes. And higher used vehicle prices, combined with high vehicle insurance and repair costs, make transportation an increasingly heavy burden."
Here is a breakdown of where Americans are seeing prices rise the fastest — and where there has been some actual reprieve from higher inflation — as they continue to wrestle with the worst sticker shock in a generation:
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Shelter costs, which account for about 40% of the core inflation increase, rose 0.6% for the month and are up 8% over the past year.
It was the largest contributor to the monthly increase, the Labor Department said in the report.
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Rising rents are concerning because higher housing costs most directly and acutely affect household budgets. Another data point that measures how much homeowners would pay in equivalent rent if they had not bought their home also climbed 0.5% from the previous month.
However, experts have noted the Labor Department captures developments in shelter costs and market rents with a big lag. The latest data included in the May CPI report likely reflects the hot housing market in mid-2022.
"Housing is a lagged indicator in the CPI measure, and it is expected to slow down in the second half the year, further contributing to the decline in core prices," said Dawit Kebede, senior economist at the Credit Union National Association.
Food has been one of the most visceral reminders of red-hot inflation for Americans, and in May, the cost of groceries increased for the first time in two months.
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Food prices climbed 0.2% over the course of the month, according to the data. On an annual basis, prices remain up 6.7% compared to the same time last year.
Consumers paid more for a number of items in May, with the price rising for bread (0.4%), meats (0.2%) like ham (1.6%), beef and veal (1%) and fresh vegetables (1.3%), including potatoes (0.2%), lettuce (5.7%) and tomatoes (0.7%).
There were some substantial declines in food prices last month: The cost of eggs — which surged earlier this year amid an outbreak of the avian flu, a highly contagious virus that often proves fatal for chickens — plunged 13.8% in May. The price of eggs is now down 0.4% when compared to the same time last year.
Americans saw some further reprieve last month in the form of lower energy costs, which fell 3.6% in May. That included a 5.6% drop in gasoline and a 7.7% decline in fuel oil. Compared with one year ago, the cost of gasoline is down about 19.7%.
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The big decline is largely because the figure is now compared with May 2022, when energy prices skyrocketed following Russia's invasion of Ukraine.
Energy
There was some good and bad news for Americans looking to buy a car in May.
Used car and truck prices, which have been a major component of the inflation increase, jumped 4.4% over the month. Prices remain down about 4.2% compared with a year ago.
However, the cost of new cars and trucks inched lower last month, falling 0.1% for the month. From the previous year, new vehicle prices are up 4.7%.
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Airline fares fell for the second straight month in May, with prices dropping 3% from April. Tickets are down about 13.4% compared with last year, according to the data.
