Key Inflation Measure Rises While Americans Cut Spending

Key Inflation Measure Rises While Americans Cut Spending/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ U.S. inflation edged up in May, signaling ongoing price pressures even as Americans dialed back spending. The Commerce Department reported a 2.3% annual rise in prices, up from April’s 2.1%, while consumer outlays slipped for the first time since January. Economists cite tariffs and shifting consumer habits as key factors.

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Inflation and Spending + Quick Looks

• Inflation ticks up: Prices rose 2.3% annually in May, higher than April.
• Core inflation accelerates: Core prices climbed 2.7%, exceeding Fed targets.
• Spending dips: U.S. consumers reduced spending by 0.1% in May.
• Tariffs’ mixed impact: Trump’s tariffs modestly boost some goods’ prices.
• Monthly inflation subdued: Price gains held at 0.1% month over month.

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Key Inflation Measure Rises While Americans Cut Spending

Deep Look

U.S. INFLATION GAUGE CLIMBS AS SPENDING EASES
A closely watched measure of inflation ticked higher in May, signaling that price pressures remain stubborn despite slowing consumer spending, according to new government data released Friday.

The Commerce Department reported that prices were up 2.3% in May compared to a year earlier, a slight increase from the 2.1% annual rate logged in April. When volatile food and energy costs are excluded, so-called core inflation rose 2.7% over the past year, also up from April’s 2.5% pace.

Both figures remain modestly above the Federal Reserve’s 2% inflation target, raising questions about how soon the Fed might feel comfortable cutting interest rates.

SPENDING PULLS BACK FOR FIRST TIME SINCE JANUARY
At the same time, American consumers cut back on spending for the first time in four months. Overall consumer expenditures fell 0.1% in May, reflecting reduced outlays on goods like cars and durable items.

The pullback follows a burst of spending earlier this spring, when many consumers rushed to purchase big-ticket items ahead of President Donald Trump’s sweeping tariffs on foreign goods.

TARIFFS’ IMPACT REMAINS MIXED
So far, the inflationary impact of Trump’s new tariffs has been relatively contained, economists say. Prices for some goods, such as toys and sporting goods, have moved higher. But other costs, including new cars, airline tickets, and apartment rents, have either declined or remained stable, helping balance overall price trends.

On a month-to-month basis, inflation remained relatively subdued. Prices increased just 0.1% in May compared with April, matching the previous month’s modest rise. Core prices rose 0.2% in May—slightly above economists’ expectations and up from April’s 0.1% monthly gain.

CONSUMER CAUTION COULD WEIGH ON ECONOMY
The slowdown in spending hints at growing caution among consumers, who account for roughly two-thirds of U.S. economic activity. Economists warn that sustained weakness in consumer outlays could weigh on overall growth, even as inflation remains above the Fed’s preferred level.

For now, policymakers face a delicate balancing act—managing stubborn inflation without tipping the economy into a downturn.

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