Prices Hit a 3-Year High in May — Consumers Keep Spending
April vs. May: Key Monthly Changes
| Metric | April | May |
|---|---|---|
| Personal Income | 0.0% | +0.7% |
| Real Disposable Income | −0.5% | +0.3% |
| Real Consumer Spending | 0.0% | +0.3% |
| PCE Price Index | +0.4% | +0.4% |
| Core PCE Price Index | +0.3% | +0.3% |
| Saving Rate | 2.6% | 3.0% |
Where Americans Spent More in May ($B)
🌾 Farm Payment Distortion
May’s income surge was partly driven by a one-time USDA Supplemental Disaster Relief payment under the American Relief Act of 2025 — not broad wage growth. Without it, income growth would be lower.
⛽ Iran War Energy Shock
The U.S.-Iran war disrupted the Strait of Hormuz — through which 20% of global oil flows. Gasoline prices surged, filtering into the price of food, shipping, and more. This is the main driver of the inflation spike.
📉 May Could Be the Peak
Oil prices fell in June as a fragile ceasefire partially reopened the Strait of Hormuz. That drop isn’t in May’s data yet, but analysts expect it to show up in June’s report (due July 30).
What This Means for You
Prices rose at their fastest annual rate in three years in May — 4.1% higher than a year ago, driven mainly by the energy shock from the U.S.-Iran war. Americans are still spending, but after accounting for inflation, real purchasing power grew only 0.3%. The Federal Reserve has essentially ruled out any interest rate cuts in 2026 — rate hikes are now on the table instead. The potential good news: oil prices are falling in June, which could mean May marks the peak of this inflation surge. But we won’t know for certain until July’s data arrives.