May’s Consumer Price Index (CPI) showed cooler than expected inflation, with the headline reading flat for the month while the annual reading declined from 3.4% to 3.3%. The Core measure, which strips out volatile food and energy prices, increased 0.2% and the annual reading declined from 3.6% to 3.4%. All these measures were softer than estimates, as moderating motor vehicle insurance costs were a key reason for the friendly Core number.
What’s the bottom line? May’s data followed better-than-expected numbers in April. This is a welcome sign that inflationary pressures may continue to ease as we move further into the year, especially after readings in the first quarter of this year were unexpectedly high.