Inflation Trends and the RCF Inflation Scorecard – May 2024

CPI Flat in May but Still Up 3.3% vs. Year Ago

Peter Bernstein, Chief Economist, 312-431-1540 x1515

The Current Situation

The Consumer Price Index showed no change in May, the best one-month reading since July 2022. Nonetheless, due to price increases in prior months, the year-over-year inflation rate of 3.3% was barely lower than April’s 3.4% rate. Core CPI increased 0.2% in May which lowered its year-over-year inflation rate to 3.4%. That is the lowest core inflation rate since April 2021, more than three years ago. We’ve always emphasized that core prices provide a better measure of inflation trends, though the Fed’s focus is on core PCE index instead of core CPI. In any case, both measures have been on a gradual but steady decline since peaking at around 6% in September 2022. Just since May of 2023, core CPI inflation has declined nearly 2%, falling from 5.3% to 3.4%.

CPI, Core CPI, and Core PCE inflation

Figure with CPI All Items, Core CPI and Core PCE, showing that all have been declining, and all are around 3% to 3.5%.

Not to diminish the good CPI news in May, but one good month is not enough to offset a series of bad months at the start of the year. It will take several more months of small price increases to bring annual inflation rates down to the Fed’s 2% goal, something reiterated in the Fed’s June meeting notes. Fortunately, there is some evidence that the good numbers from May can be repeated in the coming months, as indicated by our Inflation Scorecard metrics.

RCF’s Inflation Scorecard

RCF’s Inflation Scorecard is based on analysis of 20 different price series comprising 98% of the total consumer price index. Each of these price series represents a portion of the CPI based on household spending patterns. For example, food purchased for at-home consumption is about 8.2% of the typical consumer’s budget; it has a weight of 8.17 out of a total index of 100.

Our scorecard presents two metrics to track month-to-month price increases. The first metric is the share of the index for which inflation in the most recent month is rising (greater than the prior month’s inflation) vs. the share of the index for which inflation is falling (lower than the prior month) or prices fell (deflation). Our second metric is the share of the index for which the most recent month’s inflation exceeded 0.2%, a monthly rate that corresponds to the Federal Reserve’s target inflation rate of 2% per year.

RCF Inflation Scorecard: May 2024

Figure with falling, stable, and increasing inflation, showing that in May, a 25% share of goods and services had rising inflation, and 50% had inflation above the Fed's target.

When people hear that the CPI was unchanged in May, they might think it means that prices didn’t change during the month. But the flat CPI reading was a product of a mix of rising and falling prices for individual goods and services. In fact, it was falling prices that drove the overall stable CPI measure. Our first metric shows that 28% of the weighted CPI saw prices fall in May, the highest deflation reading since inflation began rising three years ago. In fact, the share of the CPI with falling prices exceeded the share with rising inflation (25%) for the second straight month. This indicates that deflationary trends are becoming greater than inflationary trends.

Our second metric shows that about half (51%) of the weighted CPI components had a monthly inflation rate in May above 0.2%, with the other half (49%) having monthly inflation below 0.2%. [0.2% monthly inflation approximates the Fed’s goal of 2% annual inflation.] Bear in mind that is not necessary for every individual component of the CPI to rise less than 0.2% to reach the Fed’s goal. As long as the above 0.2% and below 0.2% shares are roughly similar (as they were in May), overall inflation of 2% can be achieved. And May’s balance was a welcome recovery from January’s reading when 82% of the CPI had an inflation above 0.2% and only 18% below that level. Therefore, both our metrics show building momentum toward lower inflation.

Analysis of Individual Components of the Consumer Price Index

Table with year-on-year and month-on-month inflation for 20 components of the CPI, making up 98% of the total index.

Sources: Bureau of Labor Statistics and RCF Calculations Inflation direction indicates whether monthly inflation in May was higher or lower than monthly inflation in April. Deflation means prices fell in May vs April.   


  • Deflation was a big part of the CPI index in May.  Nearly half (9 of 20) of our CPI components saw price declines during the month.   Moreover, five components had lower prices in May 2024 than in May 2023: lodging away from home, household furnishings, new vehicles, used cars and trucks, and public transportation/airfares
  • Food-at-home (a.k.a. grocery) prices rose 0.1 in May reversing the price decline in April.  Even so, prices are up only 1.0% from a year ago.  Food-away-from-home (a.k.a. restaurant) prices rose 0.4% in May and is up 4.0% since May 2023.    
  • Yet again, shelter costs (rent and owner-occupied equivalent rent) rose 0.4% in May, the same rate as in April and March.  While these represent improvements from higher inflation in the past, year-over-year shelter inflation remains around 5.5%.  An optimistic take on that is that any reduction in shelter inflation will have a substantial impact given that shelter is more than 1/3rd of the entire CPI.   
  • Though they are 8.6% lower than a year ago, used car and truck prices rose in May suggesting deflation here might be ending.  Medicare care costs are showing rising inflation with prices up 0.5% in May following a 0.4% increase in April.  And while motor vehicle insurance prices dipped 0.1% in May, they were 20% higher than a year ago.  That’s a reminder that even in a declining inflation environment, some prices may be much higher than they were in the past.