Annual Inflation Ticks Up After Months of Declines

The impact of President Donald Trump’s tariffs is starting to be felt, with annual inflation ticking up in May after three months of declines.

The consumer price index (CPI) for May increased 0.1% on a monthly basis and rose 2.4% for the 12 months ending in May, the U.S. Bureau of Labor Statistics (BLS) reported June 11. The annual inflation rate was just above April’s 2.3% figure and the same as in March.

The index for shelter rose 0.3% in May and was the primary factor in the all items monthly increase, according to the BLS. The food index increased 0.3% as both of its major components, the index for food at home and the index for food away from home, both rose 0.3% in May. Conversely, the energy index declined 1% in May as the gasoline index fell over the month, the BLS reported.

Core inflation inched up 0.1% in May — following a 0.2% increase in April — and 2.8% annually.

Although inflation broadly held steady, the CPI report showing an uptick provides an “indication that progress on inflation has started to stall, a bit of a setback alongside recent evidence that economic activity is starting to slow down,” explained Sydney Ross, economic researcher at SHRM.

Given the ambiguity surrounding ongoing trade policies, along with evidence suggesting that businesses frontloaded consumer goods earlier in the year in anticipation of widespread tariffs, it has taken longer to see how consumer prices have responded, she said.

And although there has been, to some extent, “an unwinding of the harshest tariffs, uncertainty over trade policies continues to be a challenge for employers as they wait for clarity on which goods will be impacted and what the tariff rate will be in the future,” Ross explained.

Anecdotally, employers are saying that tariffs and economic concerns are impacting their strategies. For instance, more than half of companies (56%) across the U.S. and Canada said their workforces are concerned about base pay increases in light of recent changes to economic policies and the implementation of Trump’s tariffs, according to a pulse survey of 218 respondents conducted in April by consulting firm WTW. 

Indeed, roughly a quarter of organizations (23%) are expecting tariffs and ongoing economic volatility to result in reduced pay increases for the remainder of the year, WTW’s survey found.

Real Earnings Increase

Real average hourly earnings for all employees increased 0.3% from April to May, seasonally adjusted, the BLS reported separately. This result stems from an increase of 0.4% in average hourly earnings combined with an increase of 0.1% in the CPI.

Real average weekly earnings increased 0.3% over the month due to the change in real average hourly earnings combined with no change in the average workweek. 

From May 2024 to May 2025, real average hourly earnings increased 1.4%, seasonally adjusted.