Inflation barely rose last month as cheaper gas and cars offset some
costlier imports
[June 12, 2025] By
CHRISTOPHER RUGABER and ANNE D'INNOCENZIO
WASHINGTON (AP) — U.S. inflation picked up a bit last month as higher
prices for groceries and some imported goods were largely offset by
cheaper gas, travel services, and rents.
Consumer prices increased 2.4% in May compared with a year ago,
according to a Labor Department report released Wednesday. That is up
from a 2.3% yearly increase in April. Excluding the volatile food and
energy categories, core prices rose 2.8% for the third straight month.
Economists pay close attention to core prices because they generally
provide a better sense of where inflation is headed.
The cost of groceries, toys and games, and large appliances rose, which
could reflect the impact of President Donald Trump's tariffs. Yet the
price of new and used cars, clothes, airfares, and hotel rooms all
dropped from April to May.
On a monthly basis, overall prices ticked up just 0.1% from April to
May, down from 0.2% the previous month, with inflationary pressures
appearing muted. Core prices also dropped to 0.1% from 0.2%.
The data showed that Trump's tariffs haven't yet pushed overall prices
higher, suggesting many companies may be absorbing the cost of the
higher duties for now. Yet many economists expect the import taxes to
modestly increase inflation in the second half of the year. Companies
ranging from Walmart to Lululemon to J.M. Smucker have said they will
raise prices in the coming months to offset the impact of tariffs.
“You can point to seeing tariffs in this report, but the more important
message is that you’re seeing inflation soften enough elsewhere that
overall, price pressures continue to subside for the U.S. consumer,”
Sarah House, an economist at Wells Fargo, said.
But offsetting price drops for things like cars and air fares may not
continue at the same pace for the rest of this year, she said.
“I don’t think this report signals an all clear -- that tariffs are not
going to be a concern for the inflation picture,” House said.
The figures also show that core inflation remains stubbornly above the
Federal Reserve’s 2% target, which makes it less likely that the central
bank will cut its key short-term interest rate. Trump has repeatedly
urged the central bank to reduce borrowing costs.
Grocery prices rose 0.3% from April to May, and are up 2.2% in the past
year. Fruits and vegetables, breakfast cereals, and frozen foods all
rose last month. Egg costs fell 2.7%, though they are still more than
40% more expensive than a year ago. Gas prices dropped 2.6% last month.
Marilyn Kirschner, editor of an online fashion magazine, was shopping
for toothpaste Tuesday at Gristedes in lower Manhattan. She’s surprised
every day by high prices for items like Swiffer refills, which she said
recently cost her $30.
“You go into the store and it’s like, wait a minute, how can this be?”
Kirschner said. “Every single thing. It’s sticker shock at this point.
It’s scary, with rent and everything.”
Peter Manning, a software engineer, bought a loaf of French bread and
milk at Gristedes in his lower Manhattan neighborhood. He’s been
noticing high yogurt prices, at $8 or $9, and butter for $11.
“When we go out to the suburbs we shop there, because it’s a little
cheaper,” Manning said. “I’m sure everything’s going to probably go up.
It takes a long time ... I tell my friends, this economy, we’re watching
a slow-motion train wreck.”
Last week, the Labor Department’s Bureau of Labor Statistics, which
compiles inflation data, said it is reducing the amount of data it
collects for each inflation report. Economists have expressed concern
about the cutback. Still, less data could make inflation reports more
volatile.
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Nearly all economists expect Trump's duties will make many things more
expensive this year, including cars and groceries, though by how much is
still uncertain. Trump said Wednesday that the U.S. will keep its 30%
tariff on all goods from China, first announced last month. When added
to previous tariffs, Chinese goods will face duties of about 55%. Trump
has also imposed a 10% baseline tariff on imported goods from every
other country, and 50% import taxes on steel and aluminum.
There are several reasons it can take months for the tariffs to be felt
by consumers.
To begin with, many companies tried to beat the clock by bringing in
foreign goods before Trump’s tariffs took effect, producing a flood of
imports in March. They have stockpiled goods that weren’t hit by tariffs
in warehouses, delaying price increases for customers.
Some also held off on hiking prices during the chaos of April and May,
when Trump announced sweeping tariffs on imports from nearly 60
countries, only to put them on hold a week later.
Kim Vaccarella, founder and CEO of Bogg Bag, a line of sturdy, washable
handbags, said she had resisted raising prices even though all her
products are manufactured in China. She stocked up on inventory in the
spring, before the tariffs went into effect, and stopped importing when
tariffs on China were at 145%.
The Seacaucus, N.J., company employs about 80 people and did $100
million in business in 2024.
Vaccarella plans to raise prices in July, with the original Bogg bag
going from $90 to $95 and the “Baby” bag increasing from $70 to $75.
The increase isn’t enough to fully cover the higher tariffs. She hopes
not to raise prices any further, but said that it's hard to predict.
“We’ve forecasted, and reforecasted, and reforecasted again,” she said.
“We just need to get a handle of what will ultimately be the price we
have to pay.”
Bryan Eshelman, a partner and managing director at consulting firm
AlixPartners, said higher prices “are coming.”
Eshelman says Americans will start feeling the impact in July, and
predicts prices for back-to-school items like clothing and backpacks
could go up anywhere from 5% to 15%.
The impact is just starting to hit U.S. food producers, some of which
have already passed along higher prices to customers. The J.M. Smucker
Co., which raised the price for its coffee in May, said Tuesday that it
will raise those prices again in August.
CEO Mark Smucker said that “the current US tariff impact on green coffee
is our largest exposure.” The company’s shares tumbled 17% Tuesday.
J.M. Smucker imports 500 million pounds of green coffee annually, mostly
from Brazil and Vietnam, which currently face the 10% universal tariff
Trump imposed in April. But the two countries could face much higher
tariffs when the pause on the so-called “reciprocal” tariffs ends in
July.
Most imported goods are actually parts or raw materials for larger
products, such as the steel and aluminum goods now facing 50% duties. It
will take time for those costs to filter through the supply chain and
affect prices. But the sting would likely be broad, from grocery aisles
to car lots.
___
AP Business Writer Cathy Bussewitz contributed to this report from New
York City.
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