As another decrease in grocery expenses countered a rise in petrol prices in April, inflation dropped for a tenth consecutive month, offering some respite to Americans who had been feeling the pinch from a two-year price rise.
The consumer price index published by the Labour Department shows that consumer prices rose 4.9% from a year earlier, down from 5% in March and a 40-year high of 9.1% last June. Since April 2021, that represents the smallest yearly growth. Prices increased 0.4% on a monthly basis after rising 0.1% in March.
The Wednesday inflation report had a mixed reaction from consumers and drivers. Just in April, petrol prices increased by 3%. In contrast, the cost of groceries decreased for a second consecutive month. After declining for nine months, the price of used cars increased by 4.4%. The cost of renting increased, but more slowly.
However, the report showed some indications that inflation is still slowing down. After four consecutive months of price hikes, hotel costs fell 3% in April and airline fares fell 2.6%.
Gregory Daco, Chief Economist at EY-Parthenon, said, “It’s sticky and bumpy, but make no mistake, inflation is cooling.”
What distinguishes the core CPI from the CPI?
Following a 0.4% gain in February, core prices, which don’t include volatile food and energy costs and instead track longer-term trends, grew by 0.4% in March. As a result, the annual rise was reduced from 5.6% to 5.5%.
The nation’s journey back to normal inflation rates will be uneven, according to the research. Prices in general still showed a significant rise from the previous month. Even though supply chain delays caused by COVID have been moderating inflation for commodities, certain prices increased last month. After nine straight reductions, the cost of used automobiles soared and apparel costs rose.
Several of these price rises halted in April, despite the fact that service expenses are expected to climb as Americans resume travelling and dining out more regularly.
Will the Fed keep raising interest rates?
The Federal Reserve this week signalled that it will likely suspend its aggressive campaign that has raised a key interest rate by 5 percent during the past 14 months, despite the fact that inflation has only slightly decreased since that time. According to Fed officials, the failure of Silicon Valley Bank and two other banks will likely result in tighter lending requirements, a slowdown in the economy, and reduced inflation, which will reduce the central bank’s workload.
The CPI report, according to Capital Economics economist Andrew Hunter, keeps the Fed on track to stop raising interest rates but demonstrates that persistently high inflation may prohibit Fed officials from reducing rates to combat an economy in decline for a longer length of time.
What does the petrol price future hold?
Although petrol prices rose in April, they are still 12.2% lower than they were a year ago. Pump costs have dropped once more in recent weeks. Tuesday saw a decrease in the national average price of regular unleaded petrol, which was $3.60 per gallon.
Will the price of food decrease?
The price of groceries fell by 0.2%, marking the second consecutive monthly decline, and the annual increase slowed to 7.1% from 8.4%. Due to a slowing in global demand, commodities like wheat and maize have seen a decrease in price recently.
After a string of significant price hikes brought on by the avian flu, the price of eggs decreased by 1.5% in April. Despite this, prices have increased by 21.4% in the last year. Prices for fish and seafood, pork, and bread all decreased by 1.2%, 0.7%, and 0.3%, respectively.
However, some expenditures went up anyway. Prices for chicken and raw ground beef rose by 0.5% and 0.6%, respectively.
Once more, rent was the main cause of inflation, although the rise remained gradual. Rent increased by 0.6% in April, up from 0.5% in March but below a streak of higher increases. The growth rate for the year remained 8.8%. Based on new leases, economists anticipate a decline in rent, but this trend has been reluctant to spread to current leases.
After a wave of wholesale price rises, retail prices for used cars increased by 4.4%, but they are still down 6.6% annually. After a pandemic-related run-up that raised expenses by nearly a third, prices have been falling. Additionally, garment costs rose 0.3%.
Prices for several commodities decreased when supply-chain bottlenecks got better. Prices for new cars decreased by 0.2%. Appliance prices fell 1.9%, while furniture and bedding expenses fell 0.5%.
Even if Americans resumed their pre-COVID travel and other activities, some services became a little bit less expensive in the meanwhile. Hotel prices decreased 3%, and airline fares dropped 2.6%. Additionally, medical services fell by 0.1% after falling by 0.5% the prior month.