A key inflation gauge on Wednesday showed that prices in the United States rose in April slightly more than most analysts on Wall Street expected — but reflected some measure of economic health after the last report a month ago showed a major surge.
The Labor Department said its Consumer Price Index — which shows the average change in prices for goods and services — increased by 0.3% last month. The increase over the past 12 months was 8.3%.
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Most analysts expected the department’s report to show a monthly increase of 0.2% and 8.1% over April 2021.
“Increases in the indexes for shelter, food, airline fares and new vehicles were the largest contributors to the seasonally adjusted all items increase,” the department said in a statement.
The report showed a massive increase in energy prices over the past year, but also noted that those prices actually declined by close to 3% from March to April.
“The energy index rose 30.3% over the last year, and the food index increased 9.4%, the largest 12-month increase since the period ending April 1981,” it said.
“The energy index declined 2.7% in April after rising 11% in March. The gasoline index declined in April, falling 6.1% after increasing 18.3% the prior month.”
A month ago, the department said the index had increased over February by a sizable 1.2% and 8.5% year-to-year, which was the largest rise over any 12-month period since December 1981.
Some economists say that energy prices and costs in other heavily weighted categories, like housing, are continuing to push up inflation.
The primary driver of inflation over the past year has been a dramatic rise in gas prices. AAA said on Wednesday that the national average is $4.40 per gallon, the highest mark on record. File Photo by Phil McCarten/UPI
“Food, energy and shelter are the categories worth watching, but shelter is of particular concern,” Greg McBride, chief financial analyst at BankRate, told Yahoo Finance.
“Shelter accounts for 40% of the CPI — as it does for many household budgets — and with double-digit increases in rents kicking in, this puts the household budget in a vise even if food and energy costs level out.”
Energy has been the main driving force behind inflation, and gas prices in the United States have soared over the past month.
AAA said on Wednesday that the national average is $4.40 per gallon, an increase of 3 cents from Tuesday and a hike of almost 30 cents over the past month.
The average set a new all-time high on Wednesday, as it did Tuesday, and experts feel that demand during the summer driving season and Memorial Day holiday will push up prices further. The disruptive impact of the war in Ukraine on global energy markets is also influencing energy costs in the United States.
President Joe Biden updated a strategy on Tuesday to control inflation and gas prices by calling on Congress to curb U.S. reliance on foreign energy. He was scheduled to expand on new actions his administration is taking to bring prices down during a visit to Illinois on Wednesday.
In remarks before the Senate banking committee, Treasury Secretary Janet Yellen said that the COVID-19 pandemic is also still driving parts of the economy.
Yellen said that she expects that prices in the United States are nearing their peak, and added that the Federal Reserve’s decision last week to increase interest rates by a half-point should begin to show an impact on inflation soon. Too much consumer spending can be a primary driver of inflation and the Fed’s move on interest rates is a method to control it.
On Wall Street, the Dow lost ground for the fourth consecutive day on Tuesday, although it had lost only 84 points by the closing bell. The S&P 500 was actually up several points and the Nasdaq composite was up about 114 points — signaling some rebound on Wall Street heading into Wednesday.
Tony Roth, chief investment officer at Wilmington Trust Investment Advisors, had told CNBC on Tuesday that a weaker-than-expected Consumer Prices Index could precede a recession — as it may cause the Fed to take even more drastic action on interest rates.
“If the inflation data is not as good as we think it will be … then I think the market prices for a recession,” he said.
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