Christopher Rugaber and Anne d’Hynenzio, Associated Press
WASHINGTON (AP) – Higher grocery prices have led to a slight rise in US inflation, with some imports being largely offset by cheaper gas, travel services and rent.
Consumer prices rose 2.4% in May compared to a year ago, according to a Labor Ministry report released Wednesday. This is up from an annual increase of 2.3% in April. Excluding the volatile food and energy categories, core prices rose 2.8% for the third consecutive month. Economists generally pay close attention to core prices to provide a better sense of where inflation is heading.
The costs of groceries, toys, games and large appliances are rising, potentially reflecting the impact of President Donald Trump’s tariffs. However, new and used cars, clothing, airfares and hotel rooms all fell from April to May.
Each month, overall prices rose just 0.1% between April and May, down from 0.2% the previous month, and inflationary pressures appeared to be sluggish. Core prices fell from 0.2% to 0.1%.
Data shows Trump’s tariffs have not yet exceeded the overall price, suggesting that many companies may be absorbing higher obligation costs for now. However, many economists hope that import taxes will slightly increase inflation later this year. Companies from Walmart to Lululemon to JM Smacker say they will raise prices in the coming months to offset the impact of tariffs.
“You can point out that we look at tariffs in this report, but the more important message is that inflation is soft enough elsewhere. Overall, price pressure continues to drop on US consumers,” said Sarahaus, an economist at Wells Fargo.
However, prices such as cars and air fares may not continue at the same pace for the rest of the year, she said.
“I don’t think this report shows everything clear — tariffs wouldn’t be a concern for the inflationary image,” House said.
The figures also show that central banks are unlikely to cut key short-term interest rates as core inflation rates stubbornly surpass the Federal Reserve’s 2% target. Trump has repeatedly urged central banks to cut their borrowing costs.
Grocery prices rose 0.3% between April and May, and have risen 2.2% over the past year. Fruits and vegetables, breakfast cereals and frozen foods all rose last month. Egg costs have decreased by 2.7%, but are more than 40% higher than a year ago. Last month, gas prices fell 2.6%.
Last week, the Labor Bureau’s Bureau of Labor Statistics, which compiles inflation data, said it would reduce the amount of data collected for each inflation report. Economists have expressed concern about the cuts. Still, low data can make inflation reports more unstable.
Almost every economist expects Trump’s obligations to make many things more expensive this year, including cars and groceries, but how uncertain is. Trump said Wednesday that the US would place a 55% tariff on all imports from China, starting from the previous 30% level. He also imposed a baseline duties of 10% on imports from all other countries and a 50% import duties of steel and aluminum.
Given the potential for higher prices, Fed Chairman Jerome Powell and other Fed officials have made it clear that they will not change their key rates until they have a better sense of how tariffs will affect the economy.
There are several reasons why it takes a few months for consumers to feel the tariff.
To begin with, many companies beat watches by bringing in foreign goods before Trump’s tariffs came into effect, creating a flood of imports in March. They stockpile items that have not been hit by warehouse tariffs, and customers’ prices have been slowed.
Others lowered hiking prices during the turmoil in April and May when Trump announced sweeping fees for imports from nearly 60 countries.
Kim Vaccarella, founder and CEO of Bogg Bag, a line of sturdy, washable handbags, said she resisted price increases even though all her products were manufactured in China. She stocked stock in the spring before the tariffs came into effect and stopped imports when the tariffs on China were 145%.
The Sea Caucus, New Jersey company employs around 80 people and runs a $100 million business in 2024.
Vaccarella plans to raise prices in July, with the original Bogg bag going from $90 to $95, while the “baby” bag will increase from $70 to $75.
The increase is not sufficient to fully cover the higher tariffs. She doesn’t want to raise the price any further, but she said it’s hard to predict.
“We were predicted, reorganized and revised again,” she said. “You have to get the handle of what will be the price you’ll ultimately have to pay.”
Bryan Eshelman, partner and managing director of consulting firm Alixpartners, said higher prices are “coming.”
Echelleman predicts that Americans will begin to feel the impact in July, with prices likely to rise from 5% to 15% for back-to-school items, such as clothing and backpacks.
The impact is only beginning to be hit by US food producers, some of which have already given customers higher prices. JM Smucker Co., which raised coffee prices in May, said on Tuesday it would raise prices again in August.
CEO Mark Smucker said, “The current US tariffs on green coffee are our biggest exposure.” The company’s shares fell 17% on Tuesday.
JM Smucker imports £500 million of green coffee every year, mainly from Brazil and Vietnam, and is currently facing the 10% universal tariff Trump imposed in April. However, if the so-called “mutual” tariff suspension ends in July, both countries could face much higher tariffs.
Most imports are actually parts or raw materials for large-scale products, such as steel and aluminum goods, which are currently facing 50% of their duties. These costs take time to filter through the supply chain and affect prices. But from the grocery aisles to the car lot, the stab wound will likely be wider.
Original issue: June 11, 2025 8:53am EDT
