Inflation in the US hit 8.3 percent in April, falling slightly from the four-decade high it reached in March and breaking a streak of seven consecutive monthly increases in the annual rate of price increases.
The latest inflation report marks a mixed bag of news for consumers, showing that grocery prices are rising at their fastest annual rate in 42 years and flashing other signals that inflation is becoming more entrenched.
Still, President Joe Biden in a statement touted the dip in the annual ‘headline’ inflation number — which seems to be dropping mostly because prices began soaring a year ago, making the basis for comparison higher.
‘While it is heartening to see that annual inflation moderated in April, the fact remains that inflation is unacceptably high,’ said Biden. ‘As I said yesterday, inflation is a challenge for families across the country and bringing it down is my top economic priority.’
The Labor Department’s report on Wednesday said that the consumer price index increased 0.3 percent in April from the month before, for a 8.3 percent gain from a year ago, compared to March’s 8.5 percent increase.
The food index increased 9.4 percent from last year, the largest 12-month increase since 1981, and the energy index soared 30.3 percent from a year ago.
Excluding volatile food and energy prices, so-called ‘core’ inflation hit 6.3 percent in the 12 months ending in April, down slightly from March’s annual rate of 6.5 percent.
However, in a troubling sign inflation is becoming more entrenched, core prices jumped 0.6 percent from March to April – twice the 0.3 percent rise from February to March. Those increases were fueled by spiking prices for airline tickets, hotel rooms and new cars. Rental costs also rose sharply.
President Joe Biden in a statement touted the dip in the annual ‘headline’ inflation number — which seems to be dropping mostly because prices began soaring a year ago, making the basis for comparison higher
Inflation in the US has fallen slightly from the four-decade high it reached in March
Inflation began to soar in April 2021, meaning that annual increases are now starting from a higher base level
Biden’s full statement on April inflation rate
‘While it is heartening to see that annual inflation moderated in April, the fact remains that inflation is unacceptably high. As I said yesterday, inflation is a challenge for families across the country and bringing it down is my top economic priority.
‘This starts with the Federal Reserve, which plays a primary role in fighting inflation in our country. I thank the Senate for confirming Dr. Lisa Cook to the Board of Governors last night, and urge the Senate to confirm my remaining nominees without delay. While I will never interfere with the Fed’s independence, I believe we have built a strong economy and a strong labor market, and I agree with what Chairman Powell said last week that the number one threat to that strength – is inflation. I am confident the Fed will do its job with that in mind.
‘Beyond the Fed, my inflation plan is focused on lowering the costs that families face and lowering the federal deficit. Already this week, my Administration has announced new steps in partnership with the private sector to lower the price of high speed internet for tens of millions of Americans. And, the Congressional Budget Office reported that the federal budget deficit in the first seven months of this fiscal year fell by $1.5 trillion—putting us on track for the most deficit reduction in any year on record. The CBO also confirmed that the budget deficit so far this year is lower than it was during the same period in 2019, before the pandemic began. Today, I am traveling to Illinois to speak with farmers about more we can do to lower their costs and help them produce more, lowering the price of food for Americans and around the world. All of this is progress, but the fight against global supply chain issues related to the pandemic and Putin’s price hike will continue every day.
‘Congressional Republicans talk about inflation, but their only plan is to raise taxes on working families, taking even more money out of their pockets. If they are serious about inflation, they should send me the bipartisan innovation bill to bolster our supply chains and make more in America, along with legislation that cuts costs and the cuts the deficit, reducing families’ prescription drug and utility bills and restoring fairness to our tax code. We’ve made enormous progress in getting our economy back on track, and these measures would help us sustain this progress and bring prices down for families.’
Over the past year, grocery prices have shot up 10.8 percent, the largest such year-over-year increase since 1980. Food away from home was up 7.2 percent from a year ago.
The cost of a gallon of gas fell 6.1 percent in April but is still up nearly 44 percent from a year ago.
And so far in May, prices at the gas pump have shot back up. Nationally, the average for a gallon of gas was at a record high of $4.40 on Wednesday, according to AAA.
The high price of oil is the main factor. A barrel of U.S. benchmark crude sold for around $100 a barrel Tuesday. Gas had fallen to about $4.10 a gallon in April, after reaching its prior record high of $4.32 in March.
Though it remains well elevated over the Federal Reserve’s 2 percent target rate, April’s annual inflation reading marks a sign of relief from the prior month, and will likely be touted as progress by Biden.
Experts say that annual inflation eased as energy prices grew at a more modest pace in April — though that effect could prove short-lived, after US gasoline prices hit a new high this week.
‘April also marks a full year since prices started to dramatically increase, meaning that it’s going to become more and more difficult for 12-month inflation to remain as elevated as it was in March,’ noted John Leer, Morning Consult Chief Economist.
Inflation has become a top political threat to Biden and congressional Democrats as the crucial November midterm elections draw closer. Small business owners now say in surveys that it’s their primary economic concern, too.
In a statement responding to the April inflation report, Biden said he had confidence in the Federal Reserve to fight inflation, and touted his policies.
‘Beyond the Fed, my inflation plan is focused on lowering the costs that families face and lowering the federal deficit,’ he said, citing a program to reduce the cost of high speed internet.
‘Congressional Republicans talk about inflation, but their only plan is to raise taxes on working families, taking even more money out of their pockets,’ he added.
Biden sought to take the initiative Tuesday and declared inflation ‘the No. 1 problem facing families today’ and ‘my top domestic priority.’
‘I know you gotta be frustrated. I can taste it,’ Biden said, speaking to the country from the White House. ‘I think our policies have helped, not hurt.’
Biden blamed chronic supply chain snarls related to the swift economic rebound from the pandemic, as well as Russia’s invasion of Ukraine, for igniting inflation.
He said his administration will help ease price increases by shrinking the government’s budget deficit and by fostering competition in industries, like meatpacking, that are dominated by a few industry giants.
Republicans argue that Biden’s $1.9 trillion spending package last March overheated the economy by flooding it with stimulus checks, enhanced unemployment aid and child tax credit payments.
Over the past year, grocery prices have shot up 10.8 percent, the largest such year-over-year increase since 1980 (file photo)
A gas pump displays fuel prices in March, along with a sticker of President Joe Biden, at a gas station in Arlington, Virginia
Earlier signs that U.S. inflation might be peaking didn’t last. Price increases decelerated last August and September, suggesting at the time that higher inflation might be temporary, as many economists – and officials at the Federal Reserve – had suggested.
But prices shot up again in October, prompting Fed Chair Jerome Powell to start shifting policy toward higher rates.
This time, though, several factors are pointing to an inflation peak. Gas costs, which soared in March after Russia’s invasion of Ukraine, fell on average in April and likely slowed inflation.
While food and energy have endured some the worst price spikes of the past year, analysts often monitor the core figure to get a sense of underlying inflation.
Core inflation also typically rises more slowly than the overall price increases and can take longer to decline. Rents, for example, are rising at a historically fast pace, and there is little sign of that trend reversing anytime soon.
The unexpected persistence of high inflation has caused the Fed to embark on what may become its fastest series of interest rate increases in 33 years.
Last week, the Fed raised its benchmark short-term rate by a half-point, its steepest increase in two decades. And Powell signaled that more such sharp rate hikes are coming.
The Powell Fed is seeking to pull off the notoriously difficult – and risky – task of cooling the economy enough to slow inflation without causing a recession. Economists say such an outcome is possible but unlikely with inflation this high.
In the meantime, by some measures Americans´ wages are rising at the fastest pace in 20 years. Their higher pay enables more people to at least partly keep up with higher prices.
But employers typically respond by charging customers more to cover their higher labor costs, which, in turn, heightens inflationary pressures.
Last Friday´s jobs report for April included data on hourly pay that suggested that wage gains were slowing, which, if it continues, could help ease inflation this year.
Gas prices across the US have soared – rising 17 cents in just a week – as they hit another record high due to increasing demand and rising oil prices
The record high price of $4.37 surpasses the prior record of $4.33 set on March 11. Drivers were paying $2.94 a gallon on average a year ago at this time
On Wednesday, Biden planned to visit a family farm in Illinois as he seeks to highlight how Russia’s war on Ukraine has affected global food prices.
The visit comes as the White House is struggling to rein in inflation on many fronts, from gasoline to food. U.S. gas prices hit record highs on Tuesday, and Russia’s invasion of Ukraine in late February dramatically worsened the outlook for food prices.
The U.N. food agency recently said global food prices hit an all-time record in February and again in March. Russia and Ukraine account for nearly a third of global wheat and barley, and two-thirds of the world’s exports of sunflower oil used for cooking.
‘He’s going to talk about the support we need to continue to give to farmers to help continue to produce more and more domestically to help address the food shortages that we’re seeing in some parts of the world,’ White House press secretary Jen Psaki said on Tuesday.
Biden will announce actions aimed at helping U.S. farmers boost food production and lower food prices, including doubling funding for domestic fertilizer production and increasing technical help for nutrient management tools, the White House said.
The administration will also increase the number of counties eligible for double cropping insurance for planting a second crop on the same land in the same year, it said.
Biden will also speak at the 40th International Brotherhood of Electrical Workers International Convention. The convention was originally scheduled for last August and delayed because of the COVID-19 pandemic.
Biden is expected to speak about his support for unions, infrastructure investments and the energy industry, Psaki said.