If you're in Minneapolis or Honolulu, congrats on living in the first major US cities to return to the Fed's target of 2% inflation.

If you're dealing with seven-dollar orange juice like the rest of us, there's still reason to be cautiously optimistic. Yesterday, the Bureau of Labor Statistics released the Consumer Price Index (CPI) report for the year ending May 2023, and the closely watched measure of inflation showed that consumer prices rose 4% nationally, less than half of its peak in June 2022. While prices are still rising briskly in certain sectors of the economy, the overall report was an optimistic sign that our long inflation nightmare could be over soon.

1. Energy is doing a lot of the heavy lifting. Cheaper energy played a major role in bringing inflation down to 4% last month from 4.9% in April, per Axios. Gas prices plunged almost 20% from last year, when Russia's invasion of Ukraine sent fuel costs to the moon, while broader energy prices fell almost 12%.

2. "Revenge spending" is down. Once pandemic lockdowns lifted, Americans splurged on vacations, leisure, and recreation (new pickleball paddles!) in what economists dubbed "revenge spending." Now that everyone has taken their weeklong vacation in Italy, there are signs that revenge spending is waning: Airfare prices were down 13% annually in May and, according to the US Travel Association, hotel demand is below 2019 levels. Bad for your Insta, but good for inflation.

3. Food prices are up. The cost of food ticked up 0.2% in May from April after staying flat in the previous two months, showing how inflation has persisted on grocery store shelves. But not all aisles are created equal--the price of eggs dropped nearly 14% from April (the biggest one-month drop since 1951), while fruits and veggie prices rose 1.3%.

4. Rent is another major component propping up inflation. Shelter costs are the largest category in the CPI report, and they're still on the upward march, climbing 8.7% from a year earlier. The good news: Economists say this government data doesn't reflect on-the-ground information, such as reports of a rent slowdown by Zillow and Apartment List, which show rent softening. Shelter costs are expected to decline in the CPI for H2.