Inflation Accelerates to Fastest Pace in 3 Years as Energy Prices Bite

Inflation accelerated for a third-straight month in May amid a stalemate in negotiations to end a war with Iran that has pushed up energy prices, adding to the burden on already strained consumers.The Consumer Price Index rose 4.2 percent in May from a year earlier, the Bureau of Labor Statistics reported on Wednesday, a sharp rise from the 2.4 percent annual increase before the conflict started in February and the fastest pace since April 2023.Over the course of the month, overall prices jumped 0.5 percent.The increase has been driven almost entirely by energy prices, which are up 23.5 percent from this time a year ago.

Americans have felt that effect most acutely while filling up their vehicles: A gallon of gasoline costs $4.24 on average, according to AAA, up more than a dollar from a year ago.Faster price gains have wiped out the pay increases Americans have received over the past year, on average.Adjusted for inflation, hourly earnings have fallen 0.7 percent over the past year and are exactly where they were when President Trump returned to office.

Tax refunds that came in the spring have been spent, and reductions to the federal Supplemental Nutrition Assistance Program are now cutting into food budgets.“It’s quite a negative situation,” said Stephen Brown, chief North America economist for Capital Economics.“Low-income consumers don’t have a lot of room to maneuver at this point.”That dynamic was visible across earnings reports at large retailers in recent weeks.

Dollar General told investors that its customers had been pulling back on food purchases and looking to shop closer to home because of high gas prices.Even people making more than $100,000 a year were still coming in for cheaper essentials, however....