OP, it is possible that the teacher says he is doing fine, because he is actually doing fine. For his age. Which is ONLY 5.
By the end of YR, my august born DD could read VERY few words. She had been in the school since just after her 3rd birthday, but they don't really do reading in nursery, apart from the odd flashcard. She spent most of our home reading 'sessions' during YR wriggling, sliding off the sofa, chewing her hair, getting upset, randomly guessing from the pictures, forgetting words I had just spelt out with her.... Very frustrating and miserable for us both, but quite normal I think.
Now she has just finished Y1, she has come on leaps and bounds. She still loses concentration easily, gets fed up very soon, and guesses words, but she is a lot more interested, and can read very simple 'proper' books on her own, albeit with a bit of guesswork (Not Now Bernard is her favourite
).
It will come eventually, and you need to remain calm and not start looking to a future of him not being able to read as an adult. It will click. And it will click soon I'm sure.