Inflation jumps to 4.2%, the highest since early 2023

U.S. inflation surged to 4.2 percent in May, the highest level since early 2023. The rate rose 0.5 percentage points from April.

Energy costs tied to the Iran war drove the bulk of the increase. The energy index rose 3.9 percent in May and accounted for more than 60 percent of the overall price rise.

Inflation has surpassed wage growth for the second month in a row. Wage growth stood at 3.4 percent, down from nearly 4 percent late last year.

Real average weekly earnings fell 0.2 percent in May and 0.7 percent from a year earlier. This is the largest year-over-year decline since February 2023.

Many basics including gas, food, electricity, and medical care show inflation rates above 3 percent.

“Inflation remains the major economic pain point regardless of who has to absorb it.”

Core inflation, which excludes food and energy, rose 2.9 percent. Energy costs explain the gap with the headline 4.2 percent figure.

Oil prices have increased nearly 40 percent since the U.S. and Israel launched the war against Iran in late February. Retail gasoline prices remain nearly 40 percent higher than before the conflict.

Proposed tariffs on imports from numerous countries could add further upward pressure on prices in coming months.