Evidence is mounting that inflation is starting to accelerate.

New data released this morning shows that consumer prices climbed 0.4% month-over-month in May, which was higher than the 0.2% expected by economists.

Excluding food and energy, CPI increased by 0.3%, which was a tick higher than the 0.2% expected.

This was the strongest gain in core CPI since August 2011.

On a year-over-year basis, prices climbed by 2.1% and 2.0% respectively.

“We have been worried about rising inflation for a while but we were relaxed about this report in the wake of the PPI, which showed profit margins dropping after two big gains,” said Pantheon Macroeconomics’ Ian Shepherdson. “That was a mistake, clearly.”

There is a growing meme that the economy is picking up, and it’s only a matter of time before the Fed starts eyeing an exit from the ultra-easy policies that have characterised the post-crisis era. Today’s inflation number should feed into that narrative.

From the BLS (emphasis added):

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 per cent in May on a seasonally adjusted basis, the U.S. Bureau of Labour Statistics reported today. Over the last 12 months, the all items index increased 2.1 per cent before seasonal adjustment.

The seasonally adjusted increase in the all items index, which was the largest since February 2013, was broad-based. The indexes for shelter, electricity, food, airline fares, and gasoline were among those that contributed. The food index posted its largest increase since August 2011, with the index for food at home rising 0.7 per cent. The increases in the electricity and gasoline indexes led to a 0.9 per cent rise in the energy index.

The index for all items less food and energy rose 0.3 per cent in May, its largest increase since August 2011. Along with the indexes for shelter and airline fares, the medical care, apparel, and new vehicle indexes all increased in May. The indexes for household furnishings and operations and for used cars and trucks declined.

Here’s a table breaking down the numbers.

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