“Today's report suggests that the Fed's campaign to quell inflation is working, albeit more slowly than they would like.”
Chief global strategist at LPL Financial, Quincy Krosby, on new data released by the U.S. government reflecting prices of a mixed basket of goods and services during April.
may 10, 2023
What To Know: On Wednesday, the U.S. Bureau of Labor Statistics released economic data for the month of April reflecting prices of a mixed basket of goods and services increasing at a pace of 4.9% year-over-year. From March to April, prices increased 0.4%. This Consumer Price Index (CPI) data is used as an important gauge of inflation (high inflation = your dollar buys you less), and although inflation is lower than the 40-year high seen last summer, it is still historically high and above the Federal Reserve's 2% target rate. Since March 2022, the Fed has increased its benchmark interest rate (which impacts other borrowing costs) 10 times in an attempt to cool rising prices; many say Wednesday's report – which shows the pace of rising inflation decreasing – provides hope this is working.
More Details: In April, the price of shelter (housing, rent) "was the largest contributor" to the all items increase seen month-to-month, followed by price increases in used vehicles and gasoline prices (U.S. BLS). Meanwhile, the cost for food at home slightly decreased while the cost for food away from home (e.g., takeout) slightly increased. One interesting decrease? The cost of milk saw its largest monthly decrease since February 2015, decreasing by 2% from March to April (however, it's still up 1.6% year-over-year).
Important To Note: Because food and energy prices can be volatile, when considering future rate increases, the Federal Reserve tends to put more weight into the so-called core inflation. This reading removes the prices of food and energy from its measure; during April, core inflation rose slightly from the previous month, and was up 5.5% on an annual basis. This increase is largely due to rising shelter costs. The Wall Street Journal explains, "Housing price changes can take time to show up in inflation data due to the lag in mortgage and rental contracts," noting that economists expect the shelter costs "to cool in the coming months."
Meanwhile, other countries also continue to battle inflation. This week, the Italian government is holding a "crisis meeting" concerning the surging price of pasta. Prices for pasta in Italy are up 17.5% compared to last year. Read more about it HERE.
Consumer Price Index Summary (U.S. Bureau of Labor Statistics)
Inflation rose 4.9% in April from a year ago, less than expectations (CNBC)
US prices stay high, showing inflation pressures persist (The Associated Press)