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Inflation in the U.S. ticked up last month after hitting a four-year low in April. Prices, as measured by the Consumer Price Index for All Urban Consumers (CPI-U), rose 2.4 percent year-over-year in May, a modest increase from the 2.3 percent increase recorded in April. Core inflation, which excludes the volatile food and energy categories, was flat, with prices increasing at an annual rate of 2.8 percent in both April and May.

At 2.4 percent, overall inflation matched the expectations of economists in a recent Wall Street Journal survey. Core inflation came in at 2.8 percent, slightly cooler than the 2.9 percent they predicted. Economists expect tariffs to raise inflation even higher later in the year. Many businesses and retailers that rely on foreign imports stockpiled inventories in the early months of ‘25 before tariffs were enacted. These companies have been hesitant to pass on costs to consumers with trade policy in flux, but they may have to change their approach later in the year as stockpiles dwindle.

Utility gas prices increased by 15.3 percent year-over-year with strong global demand leading U.S. exports to outpace domestic consumption.  Electricity, housing, food away from home (i.e. meals at restaurants), and miscellaneous goods saw large price increases of three percent or more. Home furnishings, medical care, food at home (i.e. groceries), recreation, new and used cars, alcoholic beverages, and education services saw increases of less than three percent. Apparel, gasoline, and other transportation expenses saw prices decline. Gasoline prices dropped by 12.0 percent as crude oil prices have fallen.
 

The next release of CPI data will be on Tuesday, July 15, 2025.
 

Prepared by Greater Houston Partnership Research.

Colin Baker
Manager of Economic Research
bakerc@houston.org

Clara Richardson
Analyst, Research
crichardson@houston.org