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U.S. inflation picked up again in May as energy prices continued to climb.  The annual inflation rate hit 4.2 percent in May, up from 3.8 percent in April. That marks the highest level of inflation since April ’23, over three years ago. Energy prices were the main driver, with disruptions of supply chains through the Strait of Hormuz pushing U.S. gasoline prices up 40.5 percent year-over-year. Outside of fuel, price pressures remained more contained. Annual core inflation (which excludes food and energy) rose modestly to 2.9 percent in May, up from 2.8 percent in April.

The overall rate of inflation matched the expectations of economists in a recent Wall Street Journal survey. Assuming that conflict around the Strait of Hormuz will cool, these same economists expect May’s reading will be the high-water mark, with inflation leveling off in the months ahead.

Outside of the 40.5 percent annual increase in gas prices, other categories showed milder rates of inflation, including housing at 3.6 percent, food and beverages at 3.0 percent, and medical care at 2.6 percent.

Inflation data for June (including data for metro Houston) will be published by the Bureau of Labor Statistics on Tuesday, July 14.

Colin Baker
Manager of Economic Research
[email protected]