Inflation, as measured by the Consumer Price Index, is expected to run above 4% for the first time in three years because of the Iran war’s oil price shock. Fast-rising gas prices are expected in May to once again have an outsized effect on overall inflation, pushing up prices at a similar pace as that seen in 2021 and 2022, when inflation was headed for a four-decade high of 9.1%.

Economists’ Projections

Economists expect that inflation rose 0.5% in May and 4.2% from a year ago, according to FactSet estimates. That would put the three-month average at just under 0.7%, the fastest since the April to June 2022 period (when it was 0.8%).

Affordability pressures are building, and Americans are having a harder time keeping up. Fast-rising prices are already outstripping Americans’ paychecks, and that gap is widening. If CPI rises 4.2% in May, it will mean that real (inflation-adjusted) wages are declining at an annual rate of 0.8%.

The ripple effects from the war-driven energy price shock could become even more evident in May’s data, although it’s expected to be a slow boil: Categories such as airfares, transportation, food and apparel could see further increases.

Outside of food and energy, price hikes are expected to be more muted. Economists are expecting that “core” inflation rose by 0.3% in May and that the annual rate ticked up to 2.9% from 2.8% the month before.

Original reporting: KRDO (Colorado Springs metro) — read the source article.