Spiking Energy Costs Propel Inflation to a Three-Year High in May

Inflation accelerated in May to 4.2%, reaching its highest level since early 2023, as rising energy costs began to ripple through the broader economy and push up prices for goods and services. While core inflation (minus food and energy) increased only 2.9% year-over-year, energy pricing increased an incredible 23.5%, primarily due to oil and gas spikes as the war with Iran disrupts distribution. Meanwhile, the Consumer Price Index for shelter rent (which consists of Rent of Primary Residence, Owners’ Equivalent Rent and Lodging Away from Home) increased to 3.4% in May, up from 3.3% in April and 3% for 1st quarter 2026. That upturn actually runs counter to the trend for the shelter rent CPI data series as it usually runs at a three-to-four quarter lag from the All Items CPI and had been steadily decreasing since its recent peak at 8.1% in 2nd quarter 2023 (compared to the All Items CPI peak of 8.6% in 2nd quarter 2022). The seasonally adjusted CPI for All Items generally follows a pattern similar to RealPage Market Analytics’ effective asking rent growth series. After peaking at 15.3% in 1st quarter 2022, rent growth decelerated sharply, reaching near-zero levels by 3rd quarter 2023. Since then, market-rate, institutional-grade apartments have posted modest month-over-month gains through the first five months of this year, though year-over-year growth has remained largely flat since late 2023.