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Behind the Numbers: PCE Inflation Update, May 2022

This update, prepared by Dallas Fed Senior Economist Jim Dolmas, provides an in-depth analysis of the latest personal consumption expenditures (PCE) inflation data. NOTE: Terms in bold are defined in the Inflation Update Glossary.

The headline, or all-items, PCE price index rose an annualized 7.3 percent in May after increasing an annualized 2.9 percent in April. The price index for PCE excluding food and energy rose at a 4.3 percent annualized rate after increasing an annualized 4.1 percent a month earlier. Prices for food and energy rose sharply.

The Dallas Fed’s Trimmed Mean PCE inflation rate was an annualized 5.3 percent in May, compared with a 2.9 percent rate in April.

Over the six months ending in May, the trimmed mean averaged an annualized 4.4 percent rate of increase. Over the same period, the headline and core indexes averaged annualized rates of 6.8 percent and 4.7 percent, respectively.

The 12-month trimmed mean inflation rate was 4.0 percent in May, up from 3.8 percent in April. The 12-month trimmed mean inflation rate last touched 4.0 percent in October 1990. The 12-month inflation rate for headline PCE was 6.3 percent, unchanged from April, while the 12-month inflation rate for PCE excluding food and energy was 4.7 percent, versus 4.9 percent a month earlier.

Gasoline Prices Rise

The price index for gasoline and other motor fuel rose a seasonally adjusted 4.1 percent in May after falling 5.8 percent in April. Prices for the other major energy components also rose, with the price indexes for fuel oil, electricity and natural gas up 16.9 percent, 1.3 percent and 8.0 percent, respectively. The price index for energy goods and services as a whole rose 4.0 percent in May after falling 2.8 percent in April.

The price index for gasoline was up 48.5 percent for the 12 months ending in May; it had been up 41.7 percent for the 12 months ending in April. Compared with May 2021, the price index for fuel oil was up 106.7 percent, while the price indexes for electricity and natural gas were up 11.7 percent and 29.9 percent, respectively. The price index for energy goods and services as a whole was up 35.8 percent over the 12 months.

After May’s 4.1 increase, the price index for gasoline is likely to show an even larger gain when PCE data for June are released. Weekly retail price data from the Department of Energy (DOE) show gasoline prices on track for a roughly 10.7 percent increase in June before seasonal adjustment. The typical seasonal pattern for June—what we would expect given normal changes in supply-and-demand conditions—amounts to a roughly 1.1 percent price decrease, making the DOE data consistent with an 11.8 percent increase in the seasonally adjusted gasoline price index. An increase of that magnitude would contribute about 4.0 annualized percentage points to June’s headline inflation rate.

Food Prices Up Sharply

The price index for food and beverages purchased for off-premises consumption rose at a 15.7 percent annualized rate in May after increasing at a 13.3 percent rate in April. The increase in the aggregate reflects similar-sized increases in the prices of both less-processed food items (up an annualized 15.3 percent) and more-processed food items (up an annualized 15.9 percent).

The price index for food as a whole was up 11.0 percent over the 12 months ending in May. The 12-month increase in the aggregate reflects a 13.1 percent rise in the prices of less-processed items and a 10.2 percent increase in the prices of more-processed items.

Core Goods, Services Prices Climb

Prices for core goods rose an annualized 4.2 percent in May after increasing an annualized 1.2 percent in April.

Among core goods, the price index for clocks, lamps, lighting fixtures and other household decorative items (down an annualized 36.6 percent) had the largest negative impact, subtracting about 0.2 annualized percentage points from May’s core rate. At the other end of the spectrum, the price index for new light trucks (up an annualized 12.1 percent) had the largest positive impact, contributing about 0.3 annualized percentage points to May’s core rate.

For the 12 months ending in May, prices for core goods were up 5.5 percent, compared with a 6.3 percent increase for the 12 months ending in April.

Prices for core services, meanwhile, rose an annualized 4.3 percent in May after increasing an annualized 5.2 percent in April. Among components experiencing outsized changes, the price index for financial service charges, fees and commissions (down an annualized 8.9 percent) had the biggest negative impact on ex-food-and-energy inflation, subtracting around 0.3 annualized percentage points from May’s core rate. The price index for owner-occupied stationary homes (up an annualized 7.5 percent) had the largest positive impact, contributing about 0.9 annualized percentage points to May’s core rate.

Our “big three” price index—aggregating three of the largest and least-volatile components of core services: rent, owners’ equivalent rent (OER) and the price of dining out—rose at an 8.0 percent annualized rate in May, compared with a 6.3 percent rate in April. May’s one-month increase is the largest for the big three index since June 1990. Individually, the annualized increases were 7.9 percent for rent, 7.5 percent for OER and 9.2 percent for dining out (more formally, “other purchased meals”).

For the 12 months through May, the big three index was up 5.8 percent, compared with a 5.5 percent increase for the 12 months through April. The price index for core services as a whole rose 4.4 percent for the 12 months ending in May, identical to its increase for the 12 months through April.

Trimmed Mean PCE Inflation Rate
Trimmed Mean PCE
PCE Inflation Update
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