WASHINGTON (AP) — Inflation slowed in April after seven months of relentless gains, a tentative sign that price increases may peak as they continue to put financial pressure on US households.
Consumer prices rose 8.3% last month from a year ago, the government said on Wednesday† That was less than the 8.5% year-on-year increase in March, the highest since 1981. On a monthly basis, prices rose 0.3% from March to April, the smallest increase in eight months.
Still, Wednesday’s report contained some warning signs that inflation could become more entrenched. Excluding the volatile food and energy categories, so-called core prices rose twice as much from March to April as the previous month. The increases were fueled by rising prices for airline tickets, hotel rooms and new cars. The rental costs of apartments also continued to rise.
Those price increases “make it clear that there is still a long way to go before inflation returns to more acceptable levels,” said Eric Winograd, American economist at asset manager AB.
Even if it eases, inflation is likely to remain high well into 2023, economists say, leaving many Americans weighed down by price hikes that outpaced wage increases. Particularly affected are lower-income families and black and Hispanic families, who are disproportionately weighed down by more expensive food, gas and rent.
For now, a slump in gas prices in April has slowed overall inflation. Nationally, average prices for a gallon of gas in April fell to $4.10 in April, according to AAA, after peaking to $4.32 in March. But since then, gas prices have soared to a record $4.40 a gallon.
Food prices are still rising, in part because the Russian invasion of Ukraine has pushed the price of wheat and other grains up. Food prices rose 1% from March to April and nearly 11% from a year ago. That year-on-year increase is the largest since 1980.
Turmoil abroad could accelerate inflation in the coming months. For example, if the European Union decides to ban Russian oil imports, oil prices on the world market could rise. The same goes for US gas prices. And the COVID lockdowns in China could exacerbate supply chain wailing.
In April, airfares rose a record 18.6%, the largest monthly increase since record keeping in 1963. Hotel prices rose 1.7% from March to April.
Southwest Airlines said last month that it expects much higher revenues and profits this year as Americans flood airports after two years of delay in travel. The company said the average rate rose 32% in the first three months of the year from the same period last year to $159.
There are signs that supply chains are improving for some goods. Wednesday’s report showed that appliance and clothing prices are both down 0.8%, while the cost of used cars is down 0.4%, the third consecutive decline. Used cars and other goods accounted for much of the initial inflation spike last year as Americans ramped up spending after vaccines became rife.
The escalation of consumer inflation has forced many Americans, especially those on lower or fixed incomes, to cut spending on things like driving and grocery shopping. Among them is Patty Blackmon, who said she drives to fewer of her grandchildren’s sporting events since the gas in Las Vegas, where she lives, rose to $5.89.
To save money, Blackmon, 68, also hasn’t been to her hairdresser in 18 months. And she’s rethinking her plan to drive this summer to visit relatives in Arkansas.
She was recently shocked, she said, to see a half-gallon of organic milk reach $6.
“Holy cow!” she thought. “How do parents give their children milk?”
Blackmon has cut back on meat and “a steak is almost out of the question,” she said. Instead, she eats more canned salads and soups.
David Irby, 57, of Halifax, Virginia, said he is also cutting back on food and other expenses. Irby, a veteran who retired in 2015 due to a disability, said he’s switched to beef chicken, stopped buying bacon and stopped buying junk food like his favorite treat, Cheetos.
Irby’s main concern is replacing his 22-year-old Ford truck, which is not reliable on long journeys. A new one costs $50,000, while a five-year-old used version costs about $40,000.
“I don’t know how people with a fixed income can buy a car now,” he said. “It takes me almost two years to make $40,000.”
Financial pressures on households aside, inflation poses a serious political problem for President Joe Biden and congressional Democrats in midterm election season, with Republicans claiming Biden’s $1.9 trillion bailout package last March overheated the economy. by flooding it with incentives, increased unemployment support and payments of child tax credits.
On Tuesday, Biden tried to take the initiative, declaring inflation “the biggest problem facing families today” and “my top domestic priority.”
Earlier signs that US inflation could peak did not last. Price increases slowed last August and September, suggesting at the time that higher inflation could be temporary, as many economists — and Federal Reserve officials — had suggested. But in October, prices rocketed again, prompting Fed Chair Jerome Powell to shift policy toward higher rates.
Wednesday’s numbers will keep the Fed on track to deliver what may be the fastest string of rate hikes in 33 years, economists said. Last week, the Fed raised its short-term benchmark by half a point, the strongest increase in two decades. And Powell signaled that there are more such sharp rate hikes to come.
The Powell Fed is attempting the notoriously difficult — and risky — task of cooling the economy enough to slow inflation without triggering a recession. Economists say such an outcome is possible, but unlikely with such high inflation.
One of the Fed’s biggest concerns is that Americans will begin to expect chronically high inflation, making rising prices more difficult to control as such expectations can self-realize. If Americans expect costs to rise, they will likely demand higher wages. Those higher labor costs, in turn, can force companies to charge more, fueling inflation.
So far, measures of longer-term inflation expectations have been largely contained, even as prices have risen.
Still, some people are beginning to push for higher wages as prices rise.
“We haven’t had any raises based on inflation yet and we think we should because inflation is so high right now,” said Rochelle Guillou, 26, referring to her and her friend Hannah Lerman, who work at a Boston startup. .
Lerman, 25, said she thinks the cost of everything from food to online delivery services to clothing is going up.
“Rent is a big problem,” she says. “They’re trying to sell my building now, so we know our rent is going up. We don’t even know how much, but yeah, the rent is going crazy.”
Associated Press writers Anne D’Innocenzio in New York and Steve LeBlanc in Boston contributed to this report.