The most recent unemployment data provided by the US Department of Labor Statistics indicates that trend is looking up. Consumer Price Index Inflation showed further signs of easing last month. The CPI increased 0.2% month-over-month (MoM), coming in below expectations of a 0.3% increase. This follows a small dip in March with the CPI down by -0.1%. All in, annualized inflation growth came in at 2.3% YoY, just under the anticipated 2.4%.
These figures paint a complicated economic picture as consumers still are reeling from price increases in many areas. Major factors helping ease the CPI further include falling gasoline, apparel, used car and truck, and airline fares.
Monthly CPI Overview
The Consumer Price Index is a key indicator of inflationary trends in the US. That list is put together each month. A 0.2% increase in CPI for April indicates at least a little relief from inflationary pressures for consumers after the drop in March. The rise is still below predictions, indicating inflationary forces could be less widespread than earlier expected.
March’s CPI numbers were notable for their somewhat rare deflationary trend, with a decrease of 0.1%. That represented a big turnaround from previous months when inflation had been much more widespread. The drop seen in March might have been enough to sound alarms about consumer spending and the ongoing strength of the economy as a whole.
During the last year, annualized CPI inflation growth has remained consistent. It is still near the Federal Reserve’s stated long-run objective of 2%. During the CPI’s most recent report, the annualized inflation rate came in at 2.3%. That’s a sign inflation is cooling to a manageable level, albeit a bit shy of what forecasters expected.
Key Components Impacting Inflation
A few major components played an outsized role in the CPI’s surprising success in April. Gasoline prices—which are notoriously volatile, influenced by everything from OPEC supply adjustments to international war—were instrumental in bringing inflationary pressures down. When fuel costs went down, consumers benefited from the decrease in transportation costs.
Clothing costs had a big hand in boosting the CPI numbers across the board as well. The drop in clothing prices will come as a welcome relief to the many households now having to juggle more constrained household budgets. That’s not just an issue for new cars either, used car prices have plummeted. This recent drop has given false hope to millions of consumers during the last year as prices have still surged.
The other key factor was airplane ticket prices, which fell substantially during this time. This recent relaxation could be a sign that travel costs are starting to level off with demand settling back down to post-pandemic norms.
Despite this positive trend, the report pointed to ongoing obstacles fledgling entrepreneurs faced in underserved communities. Egg prices are still nearly 50% more than this time last year. This increase is a direct consequence of the continued supply chain and production problems still causing high food costs.
Wage Growth and Economic Implications
The timing of this report is excellent, because average US wages are indeed increasing right now. They’ve only gone up on average by just under one dollar an hour or around 4 percent. This wage growth may help offset some of the pressures consumers face due to rising prices in essential goods and services.
As low-wage workers see their paychecks go up, they’re more likely to spend that money in their communities, boosting economic activity. What’s really going on with wage growth and inflation. Wage increases increase the power of people to purchase. They can backfire and cause inflation if businesses raise prices to cover higher payroll costs.
The Federal Reserve predicted that these trends would continue. They’re really walking a tightrope on the monetary policy front between controlling inflation and maintaining some level of support for economic growth. The central bank’s directive has emphasized maintaining inflation around the 2% mark, indicating that recent figures may influence future policy decisions.