Inflation slightly cooled off in April as expected

The CPI increased month-over-month between March and this past April, but a smaller increase than in March. It rose by 0.3% in April after it rose 0.4% in March. Analysts expected the month-over-month change to be a 0.4% increase.

Core CPI, which excludes food and energy, climbed 3.6% year over year in April, matching the forecast. The previous year-over-year growth was 3.8% in March.

“With the 3.4% year-over-year headline increase and 3.6% in the core (excluding food and energy), these remain irritatingly high,” Mark Hamrick, Bankrate senior economic analyst, said in a statement. “The status of the battle against inflation requires that interest rates remain elevated in the near-term.”

Core CPI increased by 0.3% from March to April, per the news release from the BLS. That follows March’s increase of 0.4%. A slight moderation seemed to have been expected — the forecast was 0.3%.

“We still believe a broad disinflationary trend remains in place and five key elements should bring more disinflation throughout 2024: mildly softer consumer spending growth as evidenced by the goose egg retail sales print in April, moderating wage growth and slower job growth, declining rent inflation, narrower profit margins, and stronger productivity growth,” EY chief economist Gregory Daco said in written commentary.

Food away from home prices increased 4.1% for the 12 months ending April, which is just below the 4.2% increase in March. Meanwhile, food at home prices climbed 1.1% year over year in April, a small moderation from the 1.2% year-over-year increase in March.

“The index for shelter rose in April, as did the index for gasoline,” Wednesday’s news release from the BLS stated. “Combined, these two indexes contributed over seventy percent of the monthly increase in the index for all items.”

The shelter index increased 0.4% from March to April, matching the month-over-month growth rates seen in February and March. Looking at year-over-year unadjusted changes, shelter continues to cool down. It rose 5.5% year-over-year this past April compared to the 5.7% increase for the 12 months ending March and also the 12 months ending February.

Gas prices surged 1.2% year over year in April — similar to the 1.3% rise in March. Plus, they rose 2.8% month over month in April, above March’s 1.7% increase. The energy index increased 2.6% year over year in April. It rose 1.1% in April from the previous month, the same monthly rate as in March.

Additionally, a news release from the BLS on Tuesday showed the Producer Price Index for final demand increased 0.5% month over month in April after a decline of 0.1%. An increase was expected though for April’s month-over-month change; the forecast stated on Investing.com was 0.3%.

“The higher than expected increase in the monthly Producer Price Index (PPI) is not good news for markets and the Federal Reserve,” Eugenio Alemán, Raymond James’ chief economist, said in an economic note. “However, revisions to previous months’ data brought the year-over-year PPI in line with expectations.”

Despite CPI still remaining stubbornly high, wage growth is still outpacing inflation. April’s average hourly earnings for private workers rose 3.9% in April from a year ago, higher than the 3.4% CPI growth rate.

Federal Reserve Chair Jerome Powell said at a press conference on May 1, “we, like everyone else, like to see high wages, but we also want to see them not eaten up by high inflation.”

“And that’s really what we’re trying to do, is to cool the economy and work with what’s happening on the supply side to bring the economy back to 2% inflation,” Powell added. “Part of that will probably be having wage increases move down incrementally toward levels that are more sustainable.”