May 2021 CPI: Year-Over-Year Inflation Continues To Heat Up

According to the BLS, the Consumer Price Index (CPI-U) year-over-year inflation rate was 5.0 % year-over-year (up from the reported 4.2 % last month). The year-over-year core inflation (excludes energy and food) rate grew from 3.0 % to 3.8 %.

Analyst Opinion of the Consumer Price Index

Most items added to the month-over-month growth. Medical care services cost inflation declined from 2.2 % to 1.5 % year-over-year.

The market expected (from Econoday):

  Consensus Range Consensus Actual
CPI-U - month-over-month (MoM) 0.3 % to 0.6 % +0.4 % +0.6 %
CPI-U year-over-year (YoY) 4.5 % to 4.9 % +4.6 % +5.0 %
CPI less food & energy (MoM) 0.4 % to 0.6 % +0.4 % +0.7 %
CPI less food & energy (YoY) 3.2 % to 3.6 % +3.4 % +3.8 %

As a generalization - inflation accelerates as the economy heats up, while the inflation rate falling could be an indicator that the economy is cooling. However, inflation does not correlate well to the economy - and cannot be used as an economic indicator.

Gasoline was a major influence on the year-over-year growth of the CPI:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6 percent in May on a seasonally adjusted basis after rising 0.8 percent in April, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 5.0 percent before seasonal adjustment; this was the largest 12-month increase since a 5.4-percent increase for the period ending August 2008.

The index for used cars and trucks continued to rise sharply, increasing 7.3 percent in May. This increase accounted for about one-third of the seasonally adjusted all items increase. The food index increased 0.4 percent in May, the same increase as in April. The energy index was unchanged in May, with a decline in the gasoline index again offsetting increases in the electricity and natural gas indexes.

The index for all items less food and energy rose 0.7 percent in May after increasing 0.9 percent in April. Many of the same indexes continued to increase, including used cars and trucks, household furnishings and operations, new vehicles, airline fares, and apparel. The index for medical care fell slightly, one of the few major component indexes to decline in May.

The all items index rose 5.0 percent for the 12 months ending May; it has been trending up every month since January, when the 12-month change was 1.4 percent. The index for all items less food and energy rose 3.8 percent over the last 12-months, the largest 12-month increase since the period ending June 1992. The energy index rose 28.5 percent over the last 12-months, and the food index increased 2.2 percent.

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