US inflation hit 8.3% last month, but is slowing from its highest level in 40 years
WASHINGTON (AP) — Inflation slowed in April after seven months of relentless gains, a tentative sign that price increases could peak while putting financial pressure on U.S. households.
Consumer prices jumped 8.3% last month from 12 months earlier, the Labor Department said Wednesday. This was lower than the 8.5% year-over-year rise in March, which was the highest since 1981. Month-over-month, prices rose 0.3% from March to April, the smallest increase in eight months.
Still, Wednesday’s report contained warning signs that inflation could take root further. Excluding the volatile food and energy categories, so-called core prices jumped 0.6% from March to April, double the 0.3% rise from February to March . These increases were fueled by soaring prices for airline tickets, hotel rooms and new cars. Apartment rental costs also continued to rise steadily.
The sharp price increases from March to April “clearly show that there is still a long way to go before inflation returns to more acceptable levels,” said Eric Winograd, US economist at asset manager AB .
Certain property categories have skyrocketed over the past year. Grocery prices, for example, jumped 10.8%, the biggest year-over-year increase since 1980. The cost of a gallon of gasoline fell 6.1% in April, but it is still up nearly 44% from a year ago.
And so far in May, prices at the gas pump have hit new highs. Nationally, the average for a gallon of gasoline is at a record high of $4.40, according to AAA, although that figure is not adjusted for inflation. The high price of oil is the main reason for this. Benchmark US crude sold around $100 a barrel on Tuesday. Gas had fallen to around $4.10 a gallon in April, after hitting $4.32 in March.
Escalating consumer inflation has forced many Americans, especially those on low or fixed incomes, to cut back on expenses like driving and groceries. Among them is Patty Blackmon, who said she’s been driving fewer of her grandchildren’s sporting events since gasoline soared to $5.89 in Las Vegas, where she lives.
To save money, Blackmon, 68, has also not been to her hairdresser for 18 months. And she’s reconsidering plans to drive this summer to visit relatives in Arkansas.
She was shocked recently, she said, to see half a gallon of organic milk fetch $6.
“Holy cow!” she thought. “How do parents give milk to their children? »
Blackmon has reduced his meat intake and “a steak is almost out of the question”. Instead, she eats more canned salads and soups.
Beyond the financial strain on households, inflation poses a serious political problem for President Joe Biden and congressional Democrats in the midterm election season, with Republicans saying the 1 $.9 trillion from Biden last March overheated the economy by flooding it with stimulus checks, improved unemployment assistance and child tax credit payments.
On Tuesday, Biden sought to seize the initiative and declared inflation “the No. 1 problem facing families today” and “my top national priority.”
Biden blamed chronic supply chain groans related to the rapid economic rebound from the pandemic, as well as Russia’s invasion of Ukraine, for triggering inflation. He said his administration will help mitigate price hikes by reducing the government’s budget deficit and promoting competition in industries, like meatpacking, that are dominated by a few industry giants.
Yet further disruptions overseas or other unforeseen issues could still push US inflation to new highs. If the European Union decides, for example, to cut off Russian oil, gas prices in the United States will probably accelerate. Severe COVID lockdowns in China are worsening supply issues and hurting growth in the world’s second-largest economy.
Jose Torres, senior economist at Interactive Brokers, noted that the weakening Chinese economy has reduced demand for oil. If China eases its lockdowns later this year and more people drive, global oil prices could rise and further inflate U.S. gasoline prices
Previous signs that US inflation could peak did not last. Price increases slowed last August and September, suggesting at the time that higher inflation might be temporary, as many economists – and Federal Reserve officials – had suggested. But prices rose again in October, prompting Fed Chairman Jerome Powell to start shifting policy towards higher rates.
While food and energy have suffered the worst price spikes of the past year, analysts often watch the core figure for a sense of underlying inflation. Core inflation also generally increases more slowly than overall price increases and may take longer to decline. Rents, for example, are rising at a historically rapid rate, and there are few signs that this trend is reversing any time soon.
The unexpected persistence of high inflation prompted the Fed to embark on what could become its fastest series of interest rate hikes in 33 years. Last week, the Fed raised its benchmark short-term rate by half a point, its biggest increase in two decades. And Powell signaled that more rate hikes just as steep are to come.
The Fed Powell is looking to accomplish the notoriously difficult – and risky – task of cooling the economy enough to slow inflation without causing a recession. Economists say such an outcome is possible but unlikely with such high inflation.
Meanwhile, by some metrics, Americans’ wages are rising at the fastest rate in 20 years. Their higher wages enable more people to meet, at least in part, higher prices. But employers typically respond by charging customers more to cover their higher labor costs, which, in turn, increases inflationary pressures.
Last Friday’s jobs report for April included hourly wage data that suggested wage gains were slowing, which, if continued, could help dampen inflation this year.