Truflation: May CPI Insights
At Truflation, we believe in data and methodology, not sentiment and surveys. We created Truflation index based on real market price data collected from 30 different data sources daily to deliver crucial business intelligence around inflation. We offer real-time on-chain economic metrics for Web3 applications. Many people forecast that the inflation rate would be lower in May than in April, so let’s dive into the data and look at this month’s insights.
Based on Truflation, we saw a cooling of the % inflation growth in April; however, we are experiencing increases in May once again. Although the % inflation growth versus a year ago is marginally reducing, the more worrying aspect for the economy is that actual prices consumers pay at checkout continue to reach all-time highs in quite a few household expenditure categories. Contrary to market sentiment, prices that consumers are paying in terms of products and services continue to rise in May.
Inflation in the US as of 10th May is 11.4%, as measured by Truflation’s Dashboard. The rate of inflation is driven by the three largest household expenditure categories, which account for just over ¾ of household expenditure:
• Housing – 12.5%, where actual house prices are at an all-time high.
• Transportation – 19.6%, where actual prices are close to their all-time high.
• Food – 10.9%, which has experienced a marginal drop over the past few weeks.
These rates are still the sharpest increase in inflation for decades, and in Housing, the single biggest household expenditure category, US rental prices are at an all-time high.
Given the impact on logistics and supply chains, combined with the bans on energy imports from Russia, crude oil prices are hovering around their all-time high. Regular gasoline prices at the pump are not only up 47% versus a year ago but also at their all-time high. Demand has come back strong post-Covid lockdowns, and production has been slow to catch up. In March, the Government announced a 180 million barrel release from strategic petroleum reserves. Although the actual price did drop in the early weeks of April, this failed to have a sustained effect on the retail fuel price.
Although we started to experience the easing of supply shortages in the US, commodity prices remain high due to the supply shock of the Ukraine war sanctions and the continued impact of China's zero-Covid lockdowns. These will undoubtedly impact the actual prices consumers will be paying for products and services in the medium term and affect consumer demand.
Continued market speculation on whether interest rates will rise another 0.5% in June is rife. The Fed will start its quantitative tightening in June by selling assets on its balance sheet. They will aim to cool demand further after this month’s 0.5% interest rate hike and bring the inflation rate back towards their 2% target. This target looks far off on the horizon, given that the actual prices people pay remain very high for consumer goods and energy.
About Truflation
Truflation provides a daily, unbiased, data-driven, real-market US inflation rate and other economic data available on-chain to DeFi products and Web3 applications.
Our mission is to offer the most objective, decentralized, and current economic and financial information alternative in the form of on-chain price indexes to enable a new generation of blockchain products. We help developers create tools that help people maintain their purchasing power, navigate their portfolios through a challenging macroeconomic landscape, and propel the DeFi space into the new era of an inflation-proof and blockchain-powered economy.
Article written by CeAnn Simpson