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Economic News

United States: Inflation Gives Off Positive Signals

June 12, 2024
Francis Généreux
Principal Economist


  • The US Consumer Price Index (CPI) stalled in May, after rising 0.3% in April and 0.4% in both February and March. The index for all items less food and energy edged up 0.2% in May, after gaining 0.3% in April.
  • Total CPI rose 3.3% over the last 12 months—slower growth than the 3.4% posted for April. Core inflation slid from 3.6% to 3.4%.


We're finally seeing some good news from consumer prices. May's total CPI growth was flat, its softest reading since July 2022. Falling energy prices helped cool inflation—gas prices in particular. After adjusting for seasonal effects, prices at the pump dove 3.6% last month, the largest decline since November 2023. Fuel oil and natural gas are also down, albeit more modestly. Food prices ticked up 0.1% in May, though we're still seeing significant discrepancies between grocery prices (annual gains of 1.0%) and restaurant prices (up 4.0% over the last 12 months).

Prices excluding food and energy are up just 0.2%, which is also heartening to see. This is the smallest monthly increase since August 2021. Prices for goods (excluding good and energy) and services (excluding energy) continued on their divergent paths, though the difference has lessened somewhat. Goods prices dipped 0.04% after two months of more significant declines, and prices for new vehicles and clothing both dropped over the last month. Service prices increased—but "only" by 0.2%, which is their weakest growth since September 2021. Shelter prices continued to post solid growth (+0.4%), but medical care services did slow a bit. More notably, transportation services slid 0.5%, including a 3.6% decrease by airline fares.

May's results will help ease market fears and calm Federal Reserve (Fed) officials, who have been worried about sticky inflation since the start of the year. One of the Fed's preferred inflation measures, the change in services excluding shelter and energy, slowed in May. Further results like these could mean the Fed will be more comfortable lowering key interest rates in the final months of the year. We'll learn more from the Fed meeting which will end this afternoon.


Inflation remains high in the U.S., but May's results are clearly on the right track. It's especially encouraging to see that services inflation has slowed. However, it's too early to expect key rate cuts very soon. The Fed will probably want to see similar results in the months ahead before making a move. All the same, rate cuts should be in the cards for the last two meetings of 2024.

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