US consumer spending rose in May even as prices rose at their fastest pace in more than three years, suggesting Americans are getting a boost from the fallout from the Iran war.
The personal consumption price index rose 4.1 percent last month from a year earlier, the most since April 2023, Bureau of Economic Analysis data released Thursday showed. Excluding food and energy, prices rose 3.4 percent from a year earlier.
Consumer price inflation rose 0.3 percent from a month earlier after stalling in April.
Those numbers could put pressure on the Federal Reserve to raise interest rates this year. Despite recent peace talks between the US and Iran that have sent oil prices lower, economists expect supply chain costs to continue to rise as the initial energy shock continues through supply chains.
Looking ahead, the recent decline in gasoline prices may give consumers some relief, although prices at the pump are still about US$1 per gallon higher on average than before the war began.
Higher-than-usual tax refunds have helped boost consumer spending in recent months, while a rebounding job market and rising stock prices have also fueled spending. However, workers in all sectors have seen wage gains fail to keep pace with inflation, with many saving less or turning to credit cards to maintain spending habits.
