Inflation remained elevated in April but eased to its highest level in 40 years, indicating that a runaway rise in consumer prices since last summer may have peaked.
The consumer price index rose 8.3% year over year, down from 8.5% in March, as a drop in gasoline prices offset a continued rise in food, rent and other costs, the Labor Department said Wednesday. March’s annual advance marked the fastest since December 1981.
April’s pullback in the annual reading was the first since last August and halted five straight months of 40-year highs. But stay away from that shopping spree. Headline consumer prices rose 0.3% from March.
Much of the slowdown in the annual measure reflected a 6.1% monthly drop in gasoline prices. Pump costs, however, soared higher again this month. regular lead free hit a record high of $4.37 per gallon on Tuesday, up from $4.12 a month ago, according to AAA.
AN ‘EXPENSIVE AND UNCERTAIN SUMMER’:Can you take a road trip without spending a fortune on gas?
RUBBED WATERS FOR RIVIAN:Beloved EV Rivian hit by Ford stock sale report, Georgia governor’s race fight
Rick Kiphut, of Memphis, Tennessee, his wife and two teenage daughters planned to tow their RV to the Great Lakes in Michigan in July, as they did last year, for a 10-day vacation. But the 3,300-mile trip will cost about $550 extra in gas, so they decided to skip it this year.
“It’s not fiscally responsible,” he says.
Annual inflation slowed in April in part because prices began to rise a year ago, making the latest figures look less than great by comparison.
One worrying sign: Core consumer prices, which exclude volatile food and energy items, rose 0.6% from a month earlier, sharper than expected. The annual increase slowed to 6.2% from a four-decade high of 6.5% in March.
“The declines in headline and core inflation in April should usher in a sustained decline,” wrote economist Andrew Hunter of Capital Economics in a note to clients. But the monthly rise in core prices “indicates that underlying inflation pressures are stronger than we expected.”
On Tuesday, President Joe Biden called inflation the nation’s top economic challenge, blaming the twin crises of a “once-in-a-century pandemic” and the war in Ukraine.
“I want all Americans to know that I am taking inflation very seriously and that it is my top domestic priority,” Biden said.
As the pandemic abated this year, consumer purchases began to shift from goods to services, such as dining out and travel, says Wells Fargo economist Sam Bullard. The development began to mitigate the supply chain bottlenecks behind much of the rise in inflation.
IS CASH GARBAGE? As rates rise, inflation rises and stocks crash, you can still put your cash to work
That has started to temper increases in the price of furniture, appliances and other items. Used car prices fell 0.4% in April after falling 3.8% the previous month, although they are still up 22.7% from a year earlier. Clothing prices fell 0.8% monthly, lowering the annual rise to 5.4%.
Grocery costs increased 1% monthly and 10.8% year over year. Airfares increased 18.6% in April and 33.3% in the last 12 months. The rent rose 0.6% monthly and 4.8% compared to the previous year.
In other words, the obstacles still loom. COVID-19-related factory closures in China raised the risk of more supply disruptions, says Bullard.
Russia’s war in Ukraine reduces global oil and food supplies and intensifies supply grunts, driving up prices. Ukraine accounts for about 8% of world wheat exports. Breakfast cereal prices rose 2.4% in April and 12.1% higher than a year ago, and bread costs rose 2% and 9.1% year over year.
Proteins continued to march higher. Pork chop prices rose 1.9% monthly and 14% annually. Chicken costs increased 3.4% and 16.4% during the year. Fish rose 0.9% and 13% annually.
Julie Malkin of Toledo, Ohio, says she and her family have replaced grill favorites like pork chops, steak, salmon and shrimp with burgers, sloppy joes, homemade chili and pasta.
“The prices are ridiculous,” she says. “It’s frustrating.”
Consumers’ shift to spending more on services, coupled with a shortage of workers that drove higher wages, drive a different set of prices. In addition to the jump in airfares, hotel rates increased by 1.7%, pushing the annual rise to 19.7%.
Barclays expects annual inflation to ease to a still-high 5.7% by the end of the year and to 2%, the Fed’s target, by the end of 2023.
“The eventual decline in the pace of inflation will be very gradual,” says economist Kathy Bostjancic of Oxford Economics.
To reduce inflation, the Fed raised its key short-term interest rate by half a percentage point last week, the most in 22 years, and tentatively plans two more hikes in June and July.
Wednesday’s report will likely “strengthen the Fed’s resolve” to go ahead with those rate hikes, says Hunter of Capital Economics.
Collaboration: Michael Collins
Reference-www.usatoday.com