By CHRISTOPHER RUGABER
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 12 months earlier, the Labor Ministry 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 0.6% from March to April – twice the 0.3% increase from February to March. Those increases were fueled by rising prices for airline tickets, hotel rooms and new cars. The rental costs of apartments also continued to rise steadily.
The sharp price increases from March to April “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.
Some individual commodity categories have exploded over the past year. For example, grocery prices are up 10.8%, the biggest year-on-year jump since 1980. The price of a gallon of gas fell 6.1% in April, but is still nearly 44% higher than a year ago.
And so far in May, gas pump prices have reached new highs. Nationally, the average for a gallon of gas is a record $4.40, according to AAA, though that figure isn’t adjusted for inflation. The high oil price is the main reason. A barrel of US benchmark oil sold for about $100 a barrel on Tuesday. Gas had fallen to about $4.10 a gallon in April, after hitting $4.32 in March.
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.” Instead, she eats more canned salads and soups.
Aside from the financial pressures on households, 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 financial bailout last March overheated the economy by with incentives, improved unemployment benefits and child tax credits.
On Tuesday, Biden tried to take the initiative, declaring inflation “the biggest problem facing families today” and “my top domestic priority.”
Biden blamed chronic supply chains linked to the rapid economic recovery from the pandemic, as well as Russia’s invasion of Ukraine, for fueling inflation. He said his administration will help mitigate price hikes by reducing the government’s budget deficit and fostering competition in industries such as meat packaging, which are dominated by a few industry giants.
Still, new disturbances abroad or other unforeseen problems can always push US inflation to new highs. For example, if the European Union decides to shut down Russian oil, gas prices in the United States are likely to accelerate. China’s severe COVID lockdowns are exacerbating supply problems and hurting growth in the world’s second-largest economy.
Jose Torres, senior economist at Interactive Brokers, noted that China’s weakening economy has reduced demand for oil. If China eases its lockdowns later this year and more people drive, global oil prices could soar and further push US gas prices up
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.
While food and energy have endured some of the worst price spikes of the past year, analysts often track the key figure to get a sense of underlying inflation. Core inflation also tends to rise more slowly than general price increases and may take longer to fall. For example, rents are rising at a historically rapid pace and there is little sign that that trend will reverse any time soon.
The unexpected continued high inflation has prompted the Fed to embark on what may be the fastest string of rate hikes in 33 years. 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.
Meanwhile, Americans’ wages are rising at the fastest pace in 20 years by some measures. Their higher wages allow more people to at least partially keep up with 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 indicated wage growth was slowing, which, if continued, could help reduce inflation this year.