WASHINGTON – Inflation slowed in April after seven months of relentless gains, a warning sign that price increases could peak while still putting financial strain on US households.
Consumer prices jumped 8.3% last month from 12 months earlier, the labor ministry said on Wednesday. This was below 8.5% year-on-year growth in March, the highest since 1981. On a monthly basis, prices rose 0.3% from March to April, the lowest increase in eight months.
However, Wednesday’s report contains some warning signs that inflation may increase. With the exception of variable food and energy categories, so-called basic prices jumped 0.6% from March to April – twice as high as 0.3% from February to March. These increases were prompted by a sharp rise in the prices of airline tickets, hotel rooms and new cars. The cost of renting apartments also continues to grow steadily.
The sharp rise in prices from March to April “shows that there is still a long way to go before inflation returns to more acceptable levels,” said Eric Winograd, an American economist at Asset Manager AB.
Some categories of goods have jumped sharply in the last year. Food prices, for example, rose 10.8 percent, the biggest jump since the previous year in 1980. The price of a gallon of gas fell 6.1 percent in April, but is still close 44% compared to last year.
So far in May, gas station prices have reached new highs. At the national level, the average value per gallon of gas is at a record $ 4.40, according to AAA, although this figure has not been adjusted for inflation. The high price of oil is the main reason. A barrel of U.S. crude oil sold for about $ 100 a barrel on Tuesday. Gas fell to about $ 4.10 a gallon in April after reaching $ 4.32 in March.
The escalation of consumer inflation has forced many Americans, especially those on lower or fixed incomes, to reduce their spending on things like driving and shopping for groceries. Among them is Patti Blackman, who said she drove to fewer sporting events for her grandchildren after gasoline jumped to $ 5.89 in Las Vegas, where she lives.
To save money, the 68-year-old Blackmon has also not visited her hairdresser for 18 months. And she is reconsidering her plan to drive this summer to visit relatives in Arkansas.
She was shocked recently, she said, when she saw half a gallon of organic milk reach $ 6.
“Sacred cow!” she thought. “How do parents give milk to their children?”
Blackmon cut the meat and “steak is almost impossible to talk about.” Instead, she eats more salads and canned soups.
In addition to financial tensions for households, inflation poses a serious political problem for President Joe Biden and Democrats in Congress in the mid-election season, with Republicans claiming Biden’s $ 1.9 trillion financial support package overheated the economy last March, flooding it with incentives, increased unemployment benefits and tax credit payments for children.
On Tuesday, Biden tried to take the lead, declaring inflation “the number one problem facing families today” and “my top domestic priority.”
Biden blamed chronic supply chain problems related to the rapid economic recovery from the pandemic, as well as Russia’s invasion of Ukraine, to fuel inflation. He said his administration would help ease price increases by narrowing the government’s budget deficit and fostering competition in industries such as meat packages, which are dominated by several industrial giants.
However, new disturbances abroad or other unforeseen problems can always bring inflation back to new heights in the United States. For example, if the European Union decides to suspend Russian oil, gas prices in the United States are likely to accelerate. COVID’s severe blockades in China exacerbate supply problems and damage the growth of the world’s second-largest economy.
Jose Torres, a senior economist at Interactive Brokers, noted that China’s weakening economy has reduced demand for oil. If China eases its blockades later this year and drives more people, world oil prices could rise and further inflate US gas prices.
Previous signs that inflation in the United States may be at its peak have not continued. The rise in prices slowed last August and September, suggesting at the time that higher inflation could be temporary, as many economists and Federal Reserve officials have suggested. But prices rose again in October, prompting Fed Chairman Jerome Powell to begin changing his policy toward higher interest rates.
While food and energy have seen some of the worst price spikes in the past year, analysts often look at the key figure to get a picture of core inflation. Core inflation also tends to rise more slowly than overall price increases and may take longer to decline. Rents, for example, are rising at a historically rapid pace, and there is no sign that this trend will reverse any time soon.
The unexpected rise in high inflation has prompted the Fed to tackle what could become its fastest series of 33-year interest rate hikes. Last week, the Fed raised its base short-term interest rate by half a point, its sharpest increase in two decades. And Powell signaled that there will be more such sharp increases in interest rates.
Powell’s Federal Reserve seeks to fulfill the notoriously difficult and risky task of cooling the economy enough to slow inflation without causing a recession. Economists say such a result is possible, but unlikely with such high inflation.
Meanwhile, according to some indicators, the salaries of Americans are rising at the fastest pace in 20 years. Higher pay allows more people to at least partially cope with higher prices. But employers usually respond by charging customers more to cover their higher labor costs, which in turn increases inflationary pressures.
Last Friday’s April job report includes hourly wage figures, suggesting that wage growth is slowing, which, if continued, could help ease inflation this year.
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