{"id":11671,"date":"2026-06-10T14:23:21","date_gmt":"2026-06-10T14:23:21","guid":{"rendered":"https:\/\/www.rbc.com\/en\/economics\/?p=11671"},"modified":"2026-06-10T14:45:37","modified_gmt":"2026-06-10T14:45:37","slug":"us-cpi-may-brings-relief-on-core-inflation-but-consumer-still-underwater","status":"publish","type":"post","link":"https:\/\/www.rbc.com\/en\/economics\/us-analysis\/us-data-flashes\/us-cpi-may-brings-relief-on-core-inflation-but-consumer-still-underwater\/","title":{"rendered":"US CPI: May brings relief on core inflation but consumer still underwater"},"content":{"rendered":"\n
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Bottom Line:<\/h4>\n\n\n\n

The US CPI report highlighted that oil prices are still weighing on consumers. Headline inflation rose +0.5% m\/m – as expected – bringing the year-over-year pace to 4.2%. Core presented a welcome downside surprise (+0.2% m\/m), with the year-over-year pace still settling at an uncomfortable 2.9%.<\/strong><\/p>\n\n\n\n

The CPI report for May presents a mixed bag. The Fed may be happy with the modest rise in core inflation, but the headline pace paints a more concerning picture for consumers. Indeed, the consumer is feeling pinched as prices accelerated at the fastest annual pace since April 2023. The difference then, however, was purchasing power was improving. Currently, consumers are falling behind \u2013 take home pay fell for the third consecutive month with few signs of relief ahead.<\/p>\n\n\n\n

Core services normalized in May (after the housing data reset in April)<\/a> but remained elevated at 0.3% m\/m. The bigger downside surprise came from the core goods (-0.1% m\/m). The question is are businesses holding off on tariff passthrough following the IEEPA overturn? And are we seeing early signs of expected refunds in pricing? Or are we in another cycle (similar to H1 2025)<\/a> of inventory buildup with delayed passthrough as firms try to maintain market share with an increasingly price sensitive consumer. The reality is this trend is not sustainable \u2013 consumers will have to pull back if inflation does not moderate. And this creates two-way risk for the Fed. Hiking rates to battle inflation can worsen the affordability situation for many consumers \u2013 notably those who are relying on credit to support spending. Cutting rates can fuel inflation but prop up demand in rate sensitive sectors (i.e., housing). For now, we expect the Fed will remain on pause as the Iran negotiations continue.<\/a><\/p>\n\n\n\n

\"U.S.<\/figure>\n\n\n\n

Here\u2019s what stood out in the May report:<\/strong><\/p>\n\n\n\n

1) Energy prices drove headline inflation to its highest annual pace in three years<\/strong><\/strong><\/strong><\/p>\n\n\n\n