Key Inflation Gauge Rose Last Month While Americans Cut Back on Spending

A key inflation gauge moved higher in May in the latest sign that prices remain stubbornly elevated while Americans cut back on their spending. Prices rose 2.3 percent in May compared with a year ago, up from just 2.1 percent in April, the Commerce Department said Friday.

Excluding the volatile food and energy categories, core prices rose 2.7 percent from a year earlier, an increase from 2.5 percent the previous month. Both figures are modestly above the Federal Reserve’s 2 percent target. At the same time, Americans cut back on spending for the first time since January, as overall spending fell 0.1 percent.

The inflation figures suggest that President Donald Trump’s broad-based tariffs are still having only a modest effect on prices. The costs of some goods, such as toys and sporting goods, have risen, but those increases have been partly offset by falling prices for new cars, airline fares, and apartment rentals, among other items.

On a monthly basis, in fact, inflation was mostly tame. Prices rose just 0.1 percent in May from April, according to the Commerce Department, the same as the previous month. Core prices climbed 0.2 percent in May, more than economists expected and above last month’s 0.1 percent.

The weakness in spending, in part, likely reflects reduced purchases of cars and other manufactured goods after Americans stepped up their spending on those items this spring to get ahead of tariffs.