According to the latest Consumer Price Index report (CPI), inflation in the United States is gradually slowing down.

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The U.S. Bureau of Labor Statistics released a set of data last month showing that the May CPI increase was the lowest since March 2021.

The Consumer Price Index is a key inflation indicator that measures changes in prices of goods and services. As of May, this year's CPI has increased by 4%.

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According to the latest data from Refinitiv, this is a significant drop from April's 4.9%, slightly lower than the economist-expected increase of 4.1%. On a monthly basis, prices increased by 0.1%. Economists projected a 0.2% increase in prices from April to May.

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It's worth noting that this marks the 11th consecutive month of inflation slowdown. Around the same time last year, the Consumer Price Index had doubled, reaching a staggering 8.6%.

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Nancy Van den Houten, Chief U.S. Economist at Oxford Economics, stated, "This is another step in the right direction."

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The decline in energy prices and the moderation of food price increases have helped lower the overall data, as well as the impact of the so-called base effects: a year ago, inflation rates continued to rise, reaching a 41-year high before peaking at 9.1% in June.

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Although 4% is far from 9.1%, it still remains well above the Federal Reserve's target inflation rate. Since March 2022, the Federal Reserve has been in a historic period of monetary tightening. The Federal Reserve aims to see inflation stabilize at 2%.

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Chris Zaccarelli, Chief Investment Officer at the Independent Advisor Alliance, stated in a statement, "Inflation is still high, but the trend is right, and the Federal Reserve is ready to pause rate hikes."

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Food inflation continued to decline on a year-over-year basis. However, in May, the prices of groceries and dining out did experience a minor rebound, increasing by 0.1% and 0.5% respectively.

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Among all food items, egg prices showed a particularly significant fluctuation.

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Last year, a deadly avian flu hit U.S. chicken flocks, causing egg prices to soar. Experts originally expected egg prices to remain high for a year. However, starting in April, egg prices dropped by 13.8%, marking the largest monthly decline in egg prices in this category since 1951. The continued price drop in May even led to a year-over-year decrease in egg prices compared to the previous year.

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Prices for groceries and dining out rose month-over-month. After excluding more volatile food and energy components, the core CPI for this year is 5.3%, slightly lower than April's data.

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What is the difference between Core CPI and CPI?

Core prices exclude more volatile food and energy items and provide a better capture of long-term trends, making it more difficult to control. Although Core CPI has increased by 0.4% for the third consecutive month, the year-on-year growth rate has decreased from 5.5% to 5.3%, the lowest level since November 2021.

For the restaurant and food industry, this is naturally good news. The slowdown in CPI and inflation means that restaurant owners can alleviate pressures from raw materials and labor costs, allowing them to focus more on improving food quality and restaurant promotions.

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This is just the beginning, and many experts believe that inflation in the latter half of the year will return to a more optimistic level.

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