US inflation climbs to 4.2% in May as energy costs drive price growth

Inflation in the United States accelerated in May, largely driven by rising energy prices, while underlying price pressures remained relatively contained, according to data released by the US Bureau of Labor Statistics.

Market reaction

US stock index futures traded lower during European trading hours on Wednesday as investors weighed rising geopolitical tensions in the Middle East and awaited the release of the closely watched inflation report.

At the time of writing, Dow Jones futures were down 0.30% at around 50,750.

S&P 500 futures declined 0.40% to approximately 7,360, while Nasdaq 100 futures fell 0.61% to near 28,950, reflecting cautious sentiment ahead of the data release.

The Consumer Price Index for All Urban Consumers, a broad measure of prices paid by consumers for goods and services, increased 0.5% on a seasonally adjusted basis in May.

The monthly increase followed a 0.6% rise in April.

On an annual basis, consumer prices rose 4.2%, up from 3.8% in April.

The annual inflation rate moved above 4% for the first time in three years and reached its highest level since April 2023.

The reported figures were in line with market expectations.

Energy prices lead monthly increase

According to the BLS, the energy index rose 3.9% in May after increasing 3.8% in April and 10.9% in March.

Energy accounted for more than 60% of the overall monthly increase in consumer prices.

Gasoline prices were the primary contributor to the rise.

The gasoline index increased 7.0% during the month on a seasonally adjusted basis.

Before seasonal adjustment, gasoline prices rose 8.6%.

Electricity prices also moved higher, increasing 0.6% in May.

In contrast, natural gas prices declined 0.5% over the same period.

On a year-over-year basis, the energy index surged 23.5%, while gasoline prices jumped 40.5%.

Electricity prices increased 5.9% over the past 12 months, and natural gas prices rose 3.0%.

Core inflation remains moderate

Excluding the often-volatile food and energy categories, the core CPI increased 0.2% in May after rising 0.4% in April.

The annual core inflation rate stood at 2.9%, compared with 2.8% in April.

While the yearly increase matched expectations, the monthly gain came in below estimates of 0.3%.

Several categories contributed to the increase in core prices.

The communication index rose 1.3%, airline fares increased 2.7%, and personal care prices climbed 1.0%.

Recreation and apparel each advanced 0.3%, while used cars and trucks edged up 0.1%.

Medical care prices increased 0.3% during the month.

Within that category, hospital services rose 0.7%, while prescription drug prices declined 0.9%. Prices for physicians' services were unchanged.

Meanwhile, several categories recorded declines.

Motor vehicle insurance fell 1.7%, household furnishings and operations dropped 0.6%, and new vehicle prices decreased 0.3%.

Shelter and food continue to rise

The shelter index increased 0.3% in May, continuing to contribute to overall inflation.

Owners' equivalent rent rose 0.3%, rent increased 0.4%, and lodging away from home advanced 0.4%.

Food prices also moved higher, though at a slower pace than energy.

The food index rose 0.2% in May following a 0.5% increase in April.

Food consumed at home increased 0.1%, while food away from home rose 0.3%.

Among grocery categories, nonalcoholic beverages recorded a 0.6% increase, supported by a 1.1% rise in beverage materials such as coffee and tea.

Cereals and bakery products increased 0.4%, while fruits and vegetables rose 0.2%.

In contrast, dairy and related products declined 0.6%, driven by a 2.9% drop in cheese prices.

The meats, poultry, fish, and eggs category fell 0.2%.

Over the past 12 months, food prices increased 3.1%. Food-at-home prices rose 2.7%, while food-away-from-home prices increased 3.5%.

Annual inflation moves higher

The BLS reported that the all-items index increased 4.2% over the 12 months ending in May, compared with a 3.8% rise in the year through April.

The core index, which excludes food and energy, increased 2.9% annually.

Shelter prices rose 3.4% over the year, while other notable increases were recorded in apparel, household furnishings and operations, medical care, and recreation.

The BLS said the next Consumer Price Index report, covering June 2026, is scheduled for release on July 14, 2026.