Why is inflation cooling — and why isn’t it coming down more

Jun 13, 2023, 6:00 AM

A customer refuels at a Shell gas station in Hercules, California, on May 23, as US gasoline demand...

A customer refuels at a Shell gas station in Hercules, California, on May 23, as US gasoline demand outpaced year-ago levels by 2% in the latest government data. Photo credit: David Paul Morris/Bloomberg/Getty Images

NEW YORK (CNN) — Ahead of May’s closely watched Consumer Price Index, set to be released Tuesday morning, economists are expecting yet another month of smaller price increases.

The consensus among economists polled by Refinitiv is that prices rose by 4.1% last month compared to a year ago. If those predictions are correct, that would mark a significant decline from April, when annual inflation was 4.9%. It would also mean that inflation is about half what it was a year ago.

The slowdown in inflation occurred in conjunction with the Federal Reserve’s rate-hiking campaign, which began in March 2022. But the rate hikes haven’t prevented more inflationary pressures from seeping into the economy.

In turn, inflation over the past year has been a game of give-and-take. Here’s where some of that giving and taking is happening:

Service inflation has become more problematic

Price increases for services like dry cleaning, haircuts and transportation have been one of the top contributors to overall inflation this year and last. But the magnitude of their contribution has drastically increased.

The 5.4% 12-month increase in the cost of services last April accounted for 40% of inflation at the time, according to CPI data.

Since then, services have become more expensive, costing almost 7% more in April of this year compared to April 2022. That alone accounted for 84% of the inflation Americans experienced.

Service inflation has grown in part because consumer behavior is still out of whack from the pandemic. When the US economy shut down, consumers couldn’t spend money on many services. When it reopened, consumers jumped at the opportunity to finally enjoy services and experiences like dining out, traveling and getting their hair styled.

Firms scrambled to hire more workers and, as a result, had to raise wages. That helped fuel more inflation since it meant workers had more money to spend.

“Wage growth is still a big problem,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said recently.

A shift from broad-based to concentrated inflation

A year ago, the top contributors to overall inflation behind services were housing and energy, which accounted for 33% and 25% of the annual price increases across the economy, respectively.

No individual spending category accounted for more than 40% of overall inflation last year. But there were more categories that collectively were pushing inflation higher.

Lately, inflation is being primarily driven by fewer categories. For instance, the percentage of housing expenses that contributed to overall inflation nearly doubled to 64% from 33% a year ago. The effect of food and beverage price increases also grew.

Gas got a lot cheaper

In addition to the Fed’s rate hikes, falling gas prices are a big reason why inflation cooled from a year ago.

Around this time last year, gas prices were up 44% compared to 2021. That accounted for 19% of overall inflation last April. But in the latest CPI report, gas prices were down 12% from a year ago. That helped lower inflation overall.

We want to hear from you.

Have a story idea or tip? Send it to the KSL NewsRadio team here.


Afghan relatives offer prayers during a burial ceremony near the graves of victims who lost their l...

Niamh Kennedy and Radina Gigova, CNN

At least 300 people killed by flash floods in Afghanistan

At least 300 people have died in flash flooding that has ravaged northern Afghanistan in recent days, the Word Food Programme said Sunday.

2 months ago

The Apple Store at Towson Town Center Mall in Maryland is pictured. Apple Store workers in Towson, ...

Jordan Valinsky, CNN

Apple Store workers in Maryland vote to authorize strike

Apple Store workers in Towson, Maryland made history by voting late May 11 in favor of authorizing a strike.

2 months ago

Smoke from wildfires blankets the city as a couple has a picnic in Edmonton, Alberta, Saturday, May...

Paradise Afshar and Sara Smart, CNN

Canadians evacuate due to wildfires as air quality deteriorates

Thousands across Canada were urged to evacuate from blazing wildfires on Saturday, and the smoke emanating from them could be another danger.

2 months ago

Salvage crew members work on the deck of the cargo ship Dali on Friday, May 10....

Nicole Grether and Gloria Pazmino, CNN

Crews could use explosives to demolish part of Baltimore’s Key Bridge

Crews are expected to execute a plan to use small explosives to break apart a massive chunk of the Baltimore bridge that collapsed.

2 months ago

The sun is rising with a flare over Korla, Xinjiang Uygur Autonomous Region, China, on May 10....

Brian Fung, CNN

Why tonight’s massive solar storm could disrupt communications and GPS systems

An unusual amount of solar activity due to a solar storm this week could disrupt some of the most important technologies society relies on.

2 months ago

A customer wipes sweat from their face as they work out on a treadmill inside a Planet Fitness Inc....

Nathaniel Meyersohn, CNN

Planet Fitness will raise its $10 membership plan for the first time in 26 years

Planet Fitness will raise the price of its “classic” membership from $10 a month to $15 for new members beginning in the summer.

2 months ago

Sponsored Articles

A young woman smiles while reading the menu at a lakeside restaurant, enjoying the panoramic view o...

Bear Lake Convention & Visitors Bureau

The best restaurants to try in Bear Lake

Save this guide to the best restaurants in Bear Lake when you need to find a place to dine during your next visit.

Female leg stepping on weigh scales. Healthy lifestyle, food and sport concept....

Health Utah

Sustainable weight loss: the science-backed way to achieve it

Learn more about Debbie's weight loss journey with Health Utah, who have a unique weight loss philosophy for success.

Underwater shot of the fisherman holding the fish...

Bear Lake Convention and Visitors Bureau

Your Bear Lake fishing guide

Bear Lake offers year-round fishing opportunities. By preparing ahead of time, you might go home with a big catch!

A group of people cut a purple ribbon...


Comcast announces major fiber network expansion in Utah

Comcast's commitment to delivering extensive coverage signifies a monumental leap toward a digitally empowered future for Utahns.

a doctor putting her hand on the chest of her patient...

Intermountain Health

Intermountain nurse-midwives launch new gynecology access clinic

An access clinic launched by Intermountain nurse-midwives provides women with comprehensive gynecology care.

Young couple hugging while a realtor in a suit hands them keys in a new home...

Utah Association of Realtors

Buying a home this spring? Avoid these 5 costly pitfalls

By avoiding these pitfalls when buying a home this spring, you can ensure your investment will be long-lasting and secure.

Why is inflation cooling — and why isn’t it coming down more