The Consumer Price Index for All Urban Consumers (CPI-U) increased by 0.1% on a seasonally unadjusted basis in May 2023, according to the Bureau of Labor Statistics report published June 13. Year-over-year, before seasonal adjustment the all-items index grew by 4.0%, constituting a major deceleration in the CPI-U from April’s 4.9% reading.
May’s rosy CPI report is the lowest since March 2021’s 2.6% reading, at a time when pandemic-era inflation was just getting started. This month’s CPI report came in far better than expected by many economists and experts. For instance, Morningstar expected only a “little slowdown” in May’s inflation rate compared to April, which would be an understatement when describing May’s nearly 20% reduction in monthly inflation. As a result, financial markets rose and priced in a near-guarantee that the Federal Reserve will not raise interest rates later this week.
In short, the May 2023 CPI report indicates that the Federal Reserve’s monetary tightening policy is working as intended. However, today’s CPI numbers are still double the Fed’s target inflation rate of 2%—an aspirational figure that may be difficult or outright impossible to reach without future rate hikes.
Source: Bureau of Labor Statistics
May’s impressive monthly CPI figure (0.1) came in significantly lower than the previous month’s (0.4) while matching the month-to-month reading in March. The April “blip” in the monthly CPI report can be largely explained by the base-year effect seen between April 2021 and 2022 due to the Russian invasion of Ukraine, an event that saw immediate and large-scale price increases in oil, gas, and certain natural resources. These prices then partially settled in the subsequent months.
As depicted in the table above, the May 2023 CPI figure was largely driven by increases in consumer costs for logistics and transportation services, shelter, and food away from home.
Food Prices
The food index rose 0.2 percent in May after going unchanged in April, representing a core market segment where consumer prices rose compared to the month prior. Regarding food at home, the index slightly increased (0.1%) after decreasing (-0.2%) in April. Half of the grocery store food price indexes increased in May as well, most notably the fruits and vegetables index (1.3%). However, the meats, poultry, and eggs index dropped (-1.2%), with strong price decreases in eggs (-13.8%). This marks the lowest monthly decrease in egg costs in over 70 years (January 1951).
On the year, the food away from home index rose by 8.3 percent, with full-service meals rising 6.8 percent and limited-service meals rising 8.0 percent. Over the same period, food at home rose 5.8 percent on the year with cereals and bakery items asserting the most upward pressure on the index (10.7%).
Energy Prices
The energy index fell in May (-3.6%) after rising in April (+0.6%) and falling in March (-3.5%). Notably, gasoline prices dropped (-5.6%) after a considerable increase in the previous month (+3.0%). Concurrently, natural gas fell by 2.6 percent in May, continuing on price decreases over the previous two months. Fuel oil and electricity prices also fell, by 7.7 percent and 1.0 percent, respectively.
In sum, all energy costs fell in May, which mostly added to a continuing trendline of falling energy prices ongoing since March. However, electricity prices are still up on a 12-month basis, rising by 5.9 percent since May 2022.
Core May 2023 CPI
Regarding the core CPI data for May 2023 (inflation less food and energy), the index rose 0.4% month-over-month in May, matching its pace in both April and March. Below is an itemized breakdown of the main price fluctuations seen within May’s core CPI reading:
- Shelter index: +0.6% (+0.4% in April)
- Used cars and trucks: +4.4 (+4.4% in April)
- Motor vehicle insurance: +2.0%
- Rent index: +0.5%
- Lodging away from home: +1.8%
- Medical care index: +0.1% (unchanged in April)
- Household furnishings: (-0.6%)
- Airline fares: (-3.0%)
Source: Bureau of Labor Statistics
Seasonally Unadjusted CPI Data for May 2023
Before seasonal adjustments, the CPI-U for May 2023 increased (+0.3%) for the month, rising to an index level of 304.127. Since these figures are unadjusted, they include regular seasonal price fluctuations that generally occur at the same time and by the same margins every year.
This Year, Guard Your Wealth From Inflation
May’s CPI report may seem optimistic, but the U.S. dollar is continuing to decline in value at twice the speed that the Federal Reserve would prefer. The result is that American families have less purchasing power than they did last year, and their paychecks haven’t kept pace. While inflation is coming back down to Earth, the average American household has lost the equivalent of $7,400 in annual wages due to inflation and rate hikes.
Fortunately, you can mitigate the adverse effects of inflation. Consider speaking to your financial advisor about diversifying your investment portfolio with alternative assets that may help insulate your savings from the devaluation of the U.S. dollar.
Scarce physical assets such as gold and silver have historically outperformed traditional securities during most recessions, economic crises, and periods of high inflation. For many investors, gold functions as an inflation hedge, providing a much-needed store of value when fiat assets depreciate. As such, it is sought after by many notable investors—like Ray Dalio and Kevin O’Leary—as a strategic risk management tool.
To get started with gold or silver investing, open an account today with one of the best-rated gold IRA service providers. While you’re at it, be sure to stay up-to-date on inflation news in the months ahead. You can easily keep tabs on how inflation is impacting your household’s purchasing power by using our free CPI inflation calculator tool that tracks the effects of inflation on your purchasing power.
Liam Hunt, M.A., is a writer specializing in finance and international affairs. His articles have appeared in the Toronto Star, Ottawa Citizen, and Vancouver Sun, and his expert commentary has been featured in Forbes, Bloomerg, Barron's, and the New York Post.
