Over the past month—from March to April—the Consumer Price Index (CPI) reported only a 0.2% increase. This increase represents a small reversal of inflation measures following March’s surprise drop. This recent number is an affirmation that inflation is still on a downward trajectory. The CPI, the headline Consumer Price Index, rose by 0.22%, with core CPI—the consumer price index after excluding the often-volatile prices of food and energy—rising by 0.24%. Economists had been expecting a larger jump, but the actual numbers came in well below expectations indicating a moderation in inflationary pressures.
Over the last year, the CPI has increased by 2.8%. That’s quite the annual rate of slowdown, the most decelerated rate registering just 2.3% since early 2021. The CPI is up at an annualized rate of just 2.1% over the past three months headed into November. Even if this growth represents a positive step forward, it is significantly less than what was expected a few years ago.
Energy and Grocery Prices Influence CPI
For the month, energy prices were up 0.7%, adding a net positive influence to overall CPI. As we’ve seen with energy markets over the last year, volatility is the new normal. Prices are spiking again due to increased geopolitical turmoil and continuing supply chain constraints. On the one hand, consumers did get a little bit of relief from grocery prices—grocery prices fell by 0.4%. This decline comes as a much-needed relief to families that have dealt with climbing grocery prices in recent months.
In contrast to the recent drop in grocery prices, restaurants prices keep accelerating, rising 0.4% for the third month in a row. This continued trend is a testament to consumers’ desire to spend on eating out, even as they face increased costs in other areas. Service sector pressure came down hard in April. Services inflation jumped 0.3% in October, demonstrating the rising costs for in-person services that consumers are increasingly depending on.
Core Goods Prices and Future Projections
In April, core goods prices increased by 0.1%. This modest uptick is indicative of an overall unshakeable demand for discretionary or non-essential goods in a world of dizzying consumer habits. Inflation analysts looking down the road at economic data were all signaling an increase in the core CPI. They forecast it to go no higher than 3.6% by the end of the year. This optimistic projection is further evidence that inflation is reducing in many sectors. Underlying inflationary pressures remain and may drive more prices higher in the coming months.
The interplay of these factors has created a very confusing environment for consumers and for policymakers trying to help consumers. The Federal Reserve will likely scrutinize these developments as they consider adjustments to monetary policy in response to changing inflation dynamics.