US Prices Continue to Rise Amid Trump's Tariffs

Strategic Insights -

Economists had expected a higher increase in US prices following President Donald Trump's tariffs, but the latest data show a softer-than-expected increase in inflation. Annualized inflation ticked higher to 2.4% in May, up from 2.3% in April, while the consumer price index rose by 0.1% on a month-to-month basis, down from 0.2% the previous month. The readings were softer than expected, with economists initially forecasting a 2.5% headline CPI reading. Core inflation, which measures price increases outside of food and gas, also saw a decline, going up 0.1% on the month, down from 0.2% in April.

Key Takeaways:

  • The annualized inflation rate increased to 2.4% in May, up from 2.3% in April, while the consumer price index rose by 0.1% on a month-to-month basis.
  • Core inflation, which measures price increases outside of food and gas, declined to 0.1% on the month, down from 0.2% in April.
  • The economy added 139,000 new jobs in May, a decrease from the average monthly gain of 149,000 over the prior 12 months.
  • Multiple retailers have stated that they will increase prices due to tariffs, with 54% of US companies surveyed saying they will have to raise prices.
  • The unemployment rate has remained stable, hovering between 4% and 4.2% over the last few months.
  • The Trump administration has attempted to frame tariffs as good for the US economy in the long run, but economists argue that gradual price increases will likely persist.
  • Several of Trump's tariffs are still in place, including a 10% baseline tariff on all imported goods and 25% tariffs on auto imports.
  • Investors are closely watching the Federal Reserve's board meeting next week to see how monetary policymakers view the state of the economy.

Statistics:

  • Annualized inflation rate: 2.4% in May, up from 2.3% in April.
  • Consumer price index: 0.1% on a month-to-month basis, down from 0.2% the previous month.
  • Core inflation: 0.1% on the month, down from 0.2% in April.
  • New jobs created in May: 139,000.
  • Average monthly job gain over the prior 12 months: 149,000.
  • Unemployment rate: between 4% and 4.2% over the last few months.

Sources:

  • Bureau of Labor Statistics
  • Allianz
  • Bloomberg via Getty Images
  • Federal Reserve
  • Emily Elconin/Bloomberg via Getty Images