The rise in the trimmed mean is a sign that underlying inflation is accelerating. Now that might reverse as oil prices fall but notably, Apple today increased (significantly) the prices of many of its products because of memory chip costs. That's real consumer inflation and is related to the AI capex boom rather than the war. Apple has a very tight supply chain so it's a sign that all consumer products that have components caught up in the AI race could increase in price.
Some details:
| Measure | 1-month annualized | 6-month annualized | 12-month |
|---|---|---|---|
| Headline PCE | 5.5% | 5.3% | 4.1% |
| PCE ex-food & energy | 3.9% | 4.1% | 3.4% |
| Dallas Fed trimmed mean | 2.8% | 2.5% | 2.4% |
None of those are close to the Fed target and even the trimmed mean is now ticking up. From the basket, about 24% of it was running above 5% annualized but 26% was outright deflationary.
One problematic area was housing, with most components up 3-5%, despite a sluggish home market. I see that as a big risk if/when the housing cycle turns.
Here the big upward drivers and you can see that they're mostly related to oil prices, a booming stock market or tariffs.
| Upper-tail pressure | May annualized move |
|---|---|
| Gasoline and other motor fuel | 121.3% |
| Financial service charges, fees and commissions | 49.5% |
| Air transportation | 45.0% |
| Dental services | 25.1% |
| Communication | 20.2% |
| Major household appliances | 28.9% |
| Newspapers and periodicals | 34.9% |
| Eggs | 60.4% |
| Fuel oil | 56.8% |
