The slight decline in annual inflation is the first slowdown after seven consecutive months of deteriorating price increases.
WASHINGTON – Inflation slowed in April after seven months of bearish earnings, a first sign that price increases could still peak as financial tensions hit American households.
Consumer prices rose 8.3 percent last month from the previous 12 months, the Labor Department said on Wednesday.
This was below the annual growth rate of 8.5% in March, the highest level since 1981. From month to month, prices rose 0.3% between March and April, which is still a high figure, but the smallest increase. in eight months.
However, the report on Wednesday showed some warning signs that inflation could strengthen further. Excluding the volatile food and energy categories, core prices rose 0.6% from March to April – more than doubling the 0.3% increase from February to March. The increase was due to rising prices for air tickets, hotel rooms and new cars. Rental costs have also risen sharply.
Over the past year, food prices have risen by 10.8%, the largest increase since 1980. The price of a gallon of gas fell by 6.1% in April, but is still about 44% higher than a year ago.
In May, prices for gas pumps rose again. According to the AAA, the national average for a gallon of gas is $ 4.40, although this figure is not adjusted for inflation. High oil prices are a key factor. US benchmark crude traded at about $ 100 a barrel on Tuesday. Gas, which reached $ 4.32 in March, fell to about $ 4.10 in April.
In addition to financial tensions for households, inflation poses a serious political challenge for President Joe Biden and Democrats in Congress in the midterm election season, with Republicans claiming that Biden’s $ 1.9 trillion bailout package last March strengthened the economy by stimulating controls. unemployment benefits and child tax loan payments.
On Tuesday, Biden tried to take the initiative, declaring inflation “the number one problem facing families today” and “my top domestic priority.”
Biden blamed the rapid economic recovery from the pandemic on inflation, as well as the chronic supply chain turmoil over Russia’s intervention in Ukraine. He said his administration would help reduce price increases by reducing the government’s budget deficit and intensifying competition in industries such as meat packaging, which is dominated by several industrial giants.
However, new breaks or other unforeseen problems abroad can always push US inflation to new heights. For example, if the European Union decides to cut off Russian oil, gas prices in the United States are likely to accelerate. Blocking China’s COVID worsens supply problems and hurts growth in the world’s second-largest economy.
Previous signs that inflation in the United States will reach its peak did not last long. Price increases slowed in August and September, suggesting that high inflation could be temporary, as suggested by many economists and Federal Reserve officials. But prices rose again in October, prompting Fed Chairman Jerome Powell to start pushing policy higher.
This time, several factors indicate that inflation is at its peak. Natural gas prices, which rose in March after Russia’s invasion of Ukraine, fell on average in April. Car manufacturers’ supply chains have opened up slightly and new car sales have increased.
Although food and energy endured last year’s worst price increases, analysts often follow the key figure to get a sense of core inflation. Core inflation also usually rises more slowly than general price increases, and the decline may take longer. For example, rents have historically risen sharply, and there is no sign that this trend will soon return.
The unexpected persistence of high inflation has made the Fed the fastest interest rate series in 33 years. Last week, the Fed raised its short-term discount rate by half a percentage point, the sharpest increase in 20 years. And Powell pointed out that such sharp interest rate hikes are coming.
The Powell Fed is trying to fulfill a popularly difficult and risky task, such as cooling the economy enough to slow inflation without causing a recession. Economists say such a result is possible, but not possible with such high inflation.
Meanwhile, by some measures, Americans’ wages are growing at the fastest pace in 20 years. Their higher salaries allow more people to keep up, at least in part, with higher prices. However, employers usually respond by paying more to customers to cover higher labor costs, which in turn increases inflationary pressures.
Last Friday, the April job report included data on hourly wages, which suggested a slowdown in wage growth, and if it continues, it could help reduce inflation this year.
Consumer Price Index: The April report shows that inflation has slowed slightly
Source link Consumer Price Index: The April report shows that inflation has slowed slightly