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Tariffs Expected to Lift Underlying US Consumer Prices in May 

Shipping containers are stacked at the Port of Authority Savannah in Savannah, Georgia, US, May 6, 2025. (Reuters)
Shipping containers are stacked at the Port of Authority Savannah in Savannah, Georgia, US, May 6, 2025. (Reuters)
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Tariffs Expected to Lift Underlying US Consumer Prices in May 

Shipping containers are stacked at the Port of Authority Savannah in Savannah, Georgia, US, May 6, 2025. (Reuters)
Shipping containers are stacked at the Port of Authority Savannah in Savannah, Georgia, US, May 6, 2025. (Reuters)

US consumer prices likely increased moderately in May amid relatively cheaper gasoline, but the Trump administration's import tariffs probably started filtering through to other goods, potentially raising underlying inflation pressures.

The Consumer Price Index report from the Labor Department on Wednesday could show the CPI less the volatile food and energy components rising by the most in four months. Economists said the increase in the so-called core CPI would be attributable to higher prices from President Donald Trump's sweeping import duties. May would mark the start of tariff-related high inflation readings that could last through year end, they said.

Walmart last month said it would begin raising prices in late May and June. Economists said inflation has been slow to respond to tariffs as most retailers were selling merchandise accumulated before the duties took effect.

"Retailers showed remarkable restraint in April," said Stephen Stanley, chief US economist at Santander US Capital Markets. "May should bring the leading edge of price increases, with the maximum impact coming in June and July."

The CPI likely increased 0.2% last month after advancing by the same margin in April, a Reuters survey of economists showed. Gasoline prices were mostly lower in May as concerns over global economic growth curbed crude oil prices.

In the 12 months through May, the CPI was forecast increasing 2.5% after rising 2.3% in April. Some of the rise in the year-on-year CPI would reflect last year's low readings dropping out of the calculation.

Core CPI is forecast to have climbed 0.3%, which would be the biggest gain since January, after rising 0.2% in April. In the 12 months through May, core CPI inflation is estimated to have increased 2.9% after rising 2.8% in April.

The Federal Reserve tracks different inflation measures for its 2% target. The US central bank is expected to leave its benchmark overnight interest rate in the 4.25%-4.50% range next Wednesday while policymakers monitor the economic impact of the tariffs.

STAFFING CRUNCH

The CPI data will come under close scrutiny in the months ahead after the Bureau of Labor Statistics, the Labor Department's agency that compiles the report and other economic releases including the closely watched employment report, announced last week the suspension of CPI data collection in three cities because of resource constraints.

The BLS like all government agencies has been severely affected by mass firings, voluntary resignations, early retirements and hiring freezes, which are part of an unprecedented campaign by the White House to drastically reduce the size of government and remake it.

The BLS has also announced that it would, effective with the release of the July Producer Price Index data in August, end the calculation and publication of about 350 indexes. That would include data from PPI industry, commodity, final demand-intermediate demand and special index classifications.

Economists said that the BLS had with the CPI data reported a rise in the share of categories for which prices were calculated using a method called different cell imputation, which some viewed as less accurate.

The BLS said on Tuesday its published data met rigorous standards, but did not address staffing issues.

"Data quality is evaluated through measures of variance, bias studies, and assessments of survey methods," the agency said in a statement to Reuters. "BLS continues to evaluate data quality."

A former BLS commissioner told Reuters that staff levels were considerably low at the agency.

"I understand that BLS staffing is down by at least 15% now, that's not reflected in any official numbers yet, because many of them are still being paid," said Erica Groshen. "They are not at work and it is impinging on the agencies. Also, the hiring freeze means that they can't be replaced."

Groshen said the CPI report remained reliable, noting an increased shift towards electronic collection of data.

"At a national level, the standard errors aren't really affected very much, and the reliability is still good, but it's really disaggregated at the granular level, where you're starting to see some real losses," she said. "It's just not aiding publication standards, and so they're not putting it out, but they can still use it as input to the national numbers."

Other economists agreed, noting that the collection suspension only affected a small area.

"I don't see that as being a deal breaker," said Brian Bethune, an economics professor at Boston College. "The problem would be, if they start to have to suppress more of them or drop them out of the survey, then that could be more problematic."

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Worries About Global Economic Pain Deepen as the War in Iran Drags on

A worker refills the tank of a car at a gasoline station in Macau on March 27, 2026. (AFP)
A worker refills the tank of a car at a gasoline station in Macau on March 27, 2026. (AFP)
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Worries About Global Economic Pain Deepen as the War in Iran Drags on

A worker refills the tank of a car at a gasoline station in Macau on March 27, 2026. (AFP)
A worker refills the tank of a car at a gasoline station in Macau on March 27, 2026. (AFP)

US and Israeli attacks on Iran have driven up prices, darkened the outlook for the world economy, sent global stock markets reeling and forced developing countries to ration fuel and subsidize energy costs to protect their poorest.

Ongoing strikes and counterstrikes on Persian Gulf refineries, pipelines, gas fields and tanker terminals threaten to the prolong the global economic pain for months, even years.

“A week ago or certainly two weeks ago, I would have said: If the war stopped that day, the long-term implications would be pretty small,” said Christopher Knittel, an energy economist at the Massachusetts Institute of Technology. “But what we’re seeing is infrastructure actually being destroyed, which means the ramifications of this war are going to be long-lived.”

Iran has hit Qatar’s Ras Laffan natural gas terminal, which produces 20% of the world’s liquefied natural gas. The March 18 strike wiped out 17% of Qatar’s LNG export capacity and repairs will take up to five years, state-owned QatarEnergy said.

The war caused an oil shock from the get-go. Iran responded to US and Israeli attacks Feb. 28 by effectively closing off the Strait of Hormuz, a transit point for a fifth of the world’s oil, by threatening tankers trying to pass through.

Gulf oil exporters like Kuwait and Iraq cut production because there was nowhere for their oil to go without access to the strait. The loss of 20 million barrels of oil a day delivered what the International Energy Agency calls the “largest supply disruption in the history of the global oil market.”

The price for a barrel of Brent crude oil climbed 3.4% on Friday to settle at $105.32. That was up from roughly $70 just before the war began. Benchmark US crude rose 5.5% to settle at $99.64 per barrel.

“Historically, oil price shocks like this have led to global recessions,” Knittel said.

The war also has dredged up a bad economic memory from the oil shocks of the 1970s: stagflation.

“You’re raising the risk of higher inflation and lower growth,” said the Harvard Kennedy School's Carmen Reinhart, a former World Bank chief economist.

Gita Gopinath, former chief economist at the International Monetary Fund, recently wrote that global economic growth, expected before the war to register 3.3% this year, would be 0.3 to 0.4 percentage points lower if oil prices averaged $85 a barrel in 2026.

Fertilizer shortages and price hikes hurt farmers

The Gulf accounts for a big share of exports of two key fertilizers, a third of urea and a quarter of ammonia. Producers in the region enjoy an advantage: easy access to low-cost natural gas, the primary feedstock for nitrogen fertilizers.

Up to 40% of world exports of nitrogen fertilizer pass through the Strait of Hormuz.

Now that the passage is blocked, urea prices are up 50% since the war and ammonia 20%. Big agricultural producer Brazil is especially vulnerable because it gets 85% of its fertilizer from imports, Alpine Macro commodity strategist Kelly Xu wrote in a commentary. Egypt, a big fertilizer producer itself, needs natural gas to make the stuff and production falters when it can’t get enough.

Eventually, higher fertilizer prices are likely to make food more expensive and less abundant as farmers skimp on it and get lower yields. The squeeze on food supplies will land hardest on families in poorer countries.

The war also has disrupted world supplies of helium, a byproduct of natural gas and a key input in chipmaking, rockets and medical imaging. Qatar makes helium at the Ros Laffan facility and supplies a third of the world’s helium.

Rationing gas and limiting the air conditioning

“No country will be immune to the effects of this crisis if it continues to go in this direction,” International Energy Agency head Fatih Birol said on March 23.

Poorer countries will be hit hardest and face the biggest energy shortages “because they will be outbid when competing for the remaining oil and natural gas,” said Lutz Kilian, director of the Center for Energy and the Economy at the Federal Reserve Bank of Dallas.

Asia is especially exposed: More than 80% of the oil and LNG that passes through the Strait of Hormuz is headed there.

In the Philippines, government offices are now open just four days a week and bureaucrats must limit the use of air conditioning to nothing cooler than 75°F (24°C). In Thailand, public workers have been told to take the stairs instead of elevators.

India is the world’s second-biggest importer of liquefied petroleum gas, which is used in cooking. The Indian government is giving households priority over businesses as it allocates its limited supply and absorbing most of the price increases to keep costs low for poor families.

But LPG shortages have forced some eateries to shorten hours, close temporarily or drop dishes like curries and deep-fried snacks requiring a lot of energy.

South Korea, dependent on energy imports, is restricting the use of cars by public employees and has reinstated fuel price caps that had been dropped in the 1990s.

Crisis hits a vulnerable US economy

The United States, the world’s largest economy, is somewhat insulated.

America is an oil exporter, so its energy companies stand to benefit from higher prices. And LNG prices are lower in the US than elsewhere because its export liquefaction facilities already are running at 100% capacity. The US can’t export any more LNG than it already is, so gas stays home, keeping domestic supplies abundant and prices stable.

Still, higher gasoline prices are weighing on American consumers already frustrated by the high cost of living. According to AAA, the average price of a gallon of gasoline has risen to nearly $4 a gallon from $2.98 a month ago.

“Nothing weighs more heavily on consumers’ collective psyche than having to pay more at the pump,” Mark Zandi, chief economist at Moody’s Analytics, and his colleagues wrote in a commentary.

The US economy already was showing signs of weakness, expanding an annual pace of just 0.7% from October through December, down from a rollicking 4.4% from July through September. Employers unexpectedly cut 92,000 jobs in February and added just 9,700 a month in 2025, the weakest hiring outside a recession since 2002.

Gregory Daco, chief economist at EY-Parthenon, has raised the odds of a US recession over the next year to 40%. The risk when times are "normal'' is just 15%.

Recovery will take time

The world economy has proven resilient in the face of repeated shocks: a pandemic, Russia’s invasion of Ukraine, resurgent inflation and the high interest rates needed to bring it under control.

So there was optimism it also could shrug off the damage from the Iran war. But those hopes are fading as the threats to the Gulf's energy infrastructure continue.

“There is no economic upside to the conflict with Iran,” Zandi and his colleagues wrote. "At this point, the questions are how much longer the hostilities will continue and how much economic damage they will cause.”

Business

Two India-bound LPG Tankers Crossing Strait of Hormuz Out of Gulf

An oil tanker crossing the Strait of Hormuz (Reuters)
An oil tanker crossing the Strait of Hormuz (Reuters)
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Two India-bound LPG Tankers Crossing Strait of Hormuz Out of Gulf

An oil tanker crossing the Strait of Hormuz (Reuters)
An oil tanker crossing the Strait of Hormuz (Reuters)

Two liquefied petroleum gas tankers, BW Elm and BW Tyr, are crossing the Strait of Hormuz bound for India, according to ship tracking data from LSEG and Kpler.

The US-Israeli war against Iran has all but halted shipping through the strait, but Iran said this week that "non-hostile vessels" may transit the waterway if they coordinate with Iranian authorities.

The two India-flagged vessels have ⁠crossed the Gulf ⁠area and are in the eastern Strait of Hormuz, the data showed, according to Reuters.

India is gradually moving its stranded LPG cargoes out from the strait, with four LPG tankers moved so far - Shivalik, Nanda Devi, ⁠Pine Gas, and Jag Vasant.

As of Friday, 20 Indian-flagged ships including five LPG carriers were stranded in the Gulf, Rajesh Kumar Sinha, special secretary in the federal shipping ministry, said.

LPG carriers Jag Vikram, Green Asha and Green Sanvi are still in the western Strait of Hormuz, LSEG data show.

India, the world's second-largest LPG importer, is ⁠battling its ⁠worst gas crisis in decades, with the government cutting supplies for industries to shield households from any shortage of cooking gas.

The country consumed 33.15 million metric tons of LPG, or cooking gas, last year, with imports accounting for about 60% of demand. About 90% of those imports came from the Middle East.

India is also loading LPG onto its empty vessels stranded in the Gulf.

Business

Saudi East-West Pipeline is Pumping Oil at its Full Capacity

King Fahd Industrial Port in Yanbu (SPA)
King Fahd Industrial Port in Yanbu (SPA)
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Saudi East-West Pipeline is Pumping Oil at its Full Capacity

King Fahd Industrial Port in Yanbu (SPA)
King Fahd Industrial Port in Yanbu (SPA)

Saudi Arabia’s crucial East-West pipeline that circumvents the Strait of Hormuz is pumping oil at its full capacity of 7 million barrels a day, a person familiar with the matter told Bloomberg.

The technical milestone is the culmination of the Kingdom’s longstanding contingency plan for keeping its oil flowing after the effective closure of their main export route. Flotillas of tankers have been redirected to the Red Sea port of Yanbu to collect the oil, providing an important lifeline for global supply.

Crude exports via Yanbu have now reached about 5 million barrels a day and the kingdom is also exporting 700,000 to 900,000 barrels a day of refined products, according to the person familiar with the Saudi oil industry. Of the 7 million barrels a day that go through the pipeline, 2 million are destined for Saudi refineries, Bloomberg said.

Running the breadth of the Arabian Peninsula from the massive oil fields in the east of the country to the industrial port city of Yanbu, the pipeline is more than 1,000 kilometers (620 miles) long.

Oil prices rose on ​Friday and notched weekly gains, reflecting scepticism about prospects for a ceasefire in the month-old Iran war.

Brent crude futures rose by $4.56, or 4.2%, to $112.57 a barrel. US West Texas Intermediate futures rose $5.16, or 5.5%, to settle at $99.64.

The Brent benchmark has jumped 53% since February 27, the day before the US and Israel launched strikes against Iran, while WTI has gained 45% since then. On a weekly basis, Brent gained about ‌0.3%, while WTI ‌gained over 1%.