The Consumer Price Index this April was 8.3% higher than last April after it increased 0.3% over the month—more than the 0.2% economists forecast, but far less than the 1.2% increase during March, the Bureau of Labor Statistics said Wednesday. A temporary decline in gas prices (the national average just reached a new record high this month), along with a drop in used car prices helped the headline rate avoid reaching a fresh 40-year high. But so-called “core” inflation—which excludes food and gas prices—rose 0.6% during the month, double the pace in March, as new car and truck prices rose more than five times as much and plane tickets spiked 18.6%. The data shows many items continue to get more expensive, including basic necessities like groceries and housing, making the worst inflation in decades even more stubborn than some experts had realized and suggesting it will be a long, slow slog to return to a more typical 2% inflation rate. Economists had predicted an 8.1% inflation rate for April, and the overshoot did little to quell stock market fears that an economic recession may be coming.
‘Might Be a While’
“It looks like things are no longer getting worse, but it might be a while before households start to notice them getting better again,” said Andrew Hunter, senior U.S. economist at Capital Economics. Indeed, 76% of The Balance readers in a new survey said they were cutting back spending because of inflation. Multiple factors are stoking inflation, economists said. The war in Ukraine has upset global supplies of crude oil (which heavily influence gasoline prices) and food. That has only worsened pandemic-triggered supply chain problems that have yet to fully untangle, and which may be exacerbated by a fresh round of anti-COVID lockdowns in China. To make matters worse, companies are trying to meet the demand with fewer people available to work. The workforce—that is, the number of people either working or looking for a job—shrank in April. Avian flu outbreaks, shipping delays, driver shortages, and droughts all conspired to send food prices higher, and groceries increased 1% in April, leaving them 10.8% higher than last April. (March saw an even bigger increase of 1.5%, but in pre-pandemic years groceries typically rose 0.3% or less in a month). Rising wages and money saved during the pandemic will help many households weather the storm, but the report suggests that the Federal Reserve’s battle against inflation, which it’s fighting by raising its benchmark interest rate, may be harder than previously thought—and that it could be some time before the Fed reduces inflation to the 2% level that it’s aiming for over the longer term. “We’re probably at the peak, but it just reinforces the notion that this is going to be a really long slow descent until we get back to the 2% target,” said James Knightley, chief international economist at ING. That itself could have grim implications for the economy, since the Fed’s anti-inflation efforts involve rebalancing supply and demand by making it less appealing for people to borrow and spend money—a strategy that some economists think will drag the U.S. into a recession. Have a question, comment, or story to share? You can reach Diccon at dhyatt@thebalance.com. Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!
