Statistics released this week by the Commerce Department confirmed what many were thinking: High gas prices helped push inflation to a four-year high last month.
With high gas prices doing the heavy lifting, the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures price index, rose to 4.1% in May, according to multiple media outlets. That was up from 3.8% in April, although, on a monthly basis, it was unchanged at 0.4%.
But when stripping out gas and food prices, two of the most volatile components tracked, so-called core inflation rose at a much more muted annual rate of 3.4% from 3.3% in April, CNN reported.
The inflation readings were mostly in line with economists’ expectations, according to FactSet consensus estimates.
At the same time, spending and income rose faster than economists anticipated last month.
Disposable income rose to 0.7% in April, however, that’s before adjusting for inflation. But even when adjusting for inflation, disposable incomes rose 0.3% in April. Spending also rose by 0.3%.
Another positive development: personal savings ticked up slightly in May after dwindling for months as consumers spent more on gas, according to the CNN report.
The Commerce Department in a separate report said US gross domestic product, which measures all the goods and services produced in the economy, was revised higher to 2.1% from 1.6% in the third estimate. The upward revision can be attributed to a downward revision on imports, which subtracts from GDP, CNN reported.
With oil tankers able to pass through the Strait of Hormuz again, gas prices are starting to come down. In turn, that’s helping to alleviate inflationary concerns and pressure on the Fed to act sooner.
Part of the problem is that the inflation Americans are experiencing stems from more than just gas, Heather Long, chief economist at Navy Federal Credit Union, told CNN in a note Thursday.
“Housing, medical care and electricity are also putting pressure on family budgets and overall inflation,” she said, adding that she expects the central bank to hike rates twice this year.
