Americans already struggling with affordability saw prices rise again in April, as surging oil costs stemming from the Iran war kept driving up prices at the gas pump and impacted supply chains for other goods.
The Bureau of Labor Statistics’ Consumer Price Index, its measure of inflation, revealed prices rose 0.6% from March to April and were up 3.8% from a year ago. Those readings came in above forecasters’ expectations.
A 5.4% rise in gas prices over the month again drove the increase, following a record 21.2% spike in March. Over the year, gas prices are up 28.4%.
The cost of energy, shelter, and food also increased over the month, while the price of new vehicles and medical care declined, the department said.
While elevated gas prices are one of the fastest and most noticeable impacts of the war for consumers, John Groton, a sector lead for energy, materials and utilities at Thrivent, told USA TODAY supply chain disruptions for fertilizers, metals, and freight also risk driving up the cost of groceries, housing, and other consumer goods.
What Is the Core US Inflation Rate?
“Core” inflation, the BLS’ metric excluding more volatile energy and food costs, rose 0.4% in April, a bit more than it did in March and February.
Over the year, core inflation is up 2.8% — underscoring once again how energy prices are driving the overall inflation figure higher.
Consumer Sentiment Bleak but Spending Resilient — for Now
While the University of Michigan’s measure of consumer sentiment hit another record low this week as Americans worry about surging costs, consumer spending has remained relatively resilient — driven by high-income earners in a K-shaped economy.
Low-income workers have started to pull back, according to Kory Kantenga, head of economics for the Americas at LinkedIn.
“We’re still seeing growth in consumer spending, and the concern will be, if we start to see prices rise very sharply, does that change that dynamic?” Kantenga said. “That’s really the backbone of resilience in the U.S. economy, and if that dynamic changes, then suddenly businesses need to rethink their growth plans, rethink their hiring plans.”
Will the Fed Adjust Rates in June?
Federal Reserve policymakers contending with risks to both sides of its dual mandate of stable prices and maximum employment have stayed on the sidelines so far this year, and forecasters expect no rate change at their next meeting in mid-June.
In March, members of the rate-setting committee’s median expectation for rates at the end of 2026 implied one quarter-point cut before the end of this year. However, forecasters have also begun pricing in a rate hike as a possibility in response to a stable unemployment rate as well as positive job growth in March and April.
With Jerome Powell’s term as chair set to end May 15, senators are expected to soon confirm President Donald Trump’s pick to lead the central bank, Kevin Warsh, before the Federal Open Market Committee’s next meeting. While Warsh would have outsized influence over the Fed’s monetary policy, he’ll still have just one vote of 12 on the committee.
(This is a developing story and will be updated to add new information.)
Add a Comment