The numbers are likely to keep pressure on the Federal Reserve to raise interest rates this year
2-MIN READ2-MINBloombergPublished: 10:33pm, 25 Jun 2026US consumer spending accelerated in May even as prices rose at the fastest pace in more than three years, suggesting Americans are powering through the fallout from the Iran war.
The personal consumption expenditures price index rose 4.1 per cent last month from a year earlier, the most since April 2023, Bureau of Economic Analysis data out on Thursday showed. Excluding food and energy, prices were up 3.4 per cent from a year earlier.
Inflation-adjusted consumer spending rose 0.3 per cent from a month earlier after stalling in April.
The numbers are likely to keep pressure on the Federal Reserve to raise interest rates this year. Despite the recent peace negotiations between the US and Iran that have sent oil prices tumbling, economists expect the costs of an array of products to continue rising as the initial energy shock works its way through supply chains.
Looking ahead, the recent pullback in petrol prices could offer consumers some reprieve, though prices at the pump are still almost US$1 a gallon higher on average than before the war started.
Higher-than-usual tax refunds have helped bolster consumers in recent months, while a reaccelerating labour market and rising stock prices are also supporting spending. Even so, workers across sectors have seen pay gains fail to keep up with inflation, which has many saving less or turning to credit cards to maintain consumption habits.
