US consumer prices rose more than expected in April, closely-watched data out Wednesday showed.
The headline and core gauges rose 8.3% and 6.2% YoY, respectively. Economists anticipated an 8.1% annual increase in the all-items index and a 6% gain on core (figure below).
Although not dramatic, the overshoots (versus consensus) could undermine sundry “peak inflation” narratives and add to pervasive market angst.
If you’re inclined to optimism, you might suggest that the YoY prints are at least falling now, but that’s not how markets will interpret April’s data.
On a MoM basis, the headline gauge rose 0.3%, slightly more than expected, but the “cringe print” (if you will) was the monthly core reading.
Core prices jumped 0.6% in April from March, double the prior month’s 0.3% increase and easily ahead of estimates (figure below).
Recall that March’s cooler-than-expected monthly core reading was the (shaky) pillar on which many market participants’ “peak inflation” stories rested. That pillar cracked on Wednesday.
Under the hood, the report was predictably disconcerting. Food prices rose 0.9% from March, for example, only slightly less than the prior month’s elevated pace. It was the 17th consecutive monthly increase (figure below).
On an annual basis, the broad food index rose 9.4%.
Worse, the food at home index rose 1%, the fourth consecutive monthly gain of at least that much. On an unadjusted, 12-month basis, grocery prices rose almost 11% in April, among the sharpest annual increases in US history (figure below).
The breakdown within the food gauge was very worrying, and suggested services sector labor shortages may be colliding with pent-up demand to drive prices dramatically higher.
The index for food away from home rose twice as much on a monthly basis in April as it did in March. On a 12-month basis, the gauge jumped 7.2%. The near 9% gain on the index for full service meals was the largest 12-month increase since data began a quarter century ago.
The gasoline index dropped sharply from the prior month (green dot in the figure, below). Recall that March’s 18% increase (red dot) was among the largest in US history.
That’s not likely to resonate with voters, though, because gas prices hit a record high on Tuesday, just 24 hours ahead of Wednesday’s CPI data. The 12-month increase on the gasoline index was almost 44%.
Gauges for natural gas and electricity prices rose on a monthly basis and were, of course, sharply higher (11% and 22.7%) measured annually.
Shelter prices kept rising. There was no respite there. The rent index rose 0.6% and owners’ equivalent rent 0.5%. Used car prices fell a third month, and apparel prices receded.
Wednesday’s data will pile pressure on policymakers already at pains to demonstrate their resolve in the face of generationally high inflation in a politically-sensitive year. For the White House, the data is a severe headache.
Real average hourly earnings fell -2.6% YoY, which BMO’s Ian Lyngen called “a reminder of the eroding spending power of consumers on an inflation-adjusted basis.”
Fine. Screw this. Bring on the recession.
There is really no reason to think any of this is going to improve in the near term. Russia’s war, China’s Covid zero protocol, Trump’s tariffs (see Smoot-Hawley tariff act), wage increases, full employment with 11.5M unfilled openings (gosh, immigrants seem like a smart idea right now!), and increased oil prices impacting the cost of global supply chain shipping. No way inflation abates any time soon regardless of how much QT the Fed pours on it.
Stagflation seems like the best worst case scenario at this point.
I absolutely concur with you and I’m not sure why talking heads like Larry Summers are not more honest about the many causes of this inflation.
Prices are high in things people have to buy: food, gas (and oil based products), shipping, energy, shelter, and the usual culprit healthcare. People will bid up those scarce necessities even if they have less money as they don’t have a choice.
Russia’s going to be sanctioned for awhile (Putin’s not planning on going anywhere), so oil (a key input to food) will be expensive for awhile.
There’s not enough housing, without supplies nor labor it won’t be built, and it’s increasingly owned by a smaller group (who therefore benefit from scarcity); high interest rates won’t help mortgages so an even more captive audience to rent raises.
The US demographics are no longer favorable to growth, and ask China – it doesn’t get fixed quickly; immigration would help a lot but between racists and unions it’s also not going to improve.
Result: higher prices are here to stay and while deflating speculation is necessary a Recession and lost jobs (and companies) will just compound the pain for the bottom lf the economic dogpile. I wish the excess had been invested in Renewable Energy, Infrastructure, and Automation as then we’d have deflation to counterbalance.
As you mentioned, the YOY CPI is falling. So, the peak possibility isn’t entirely dead.
Wow! Impressive. Could you make a silk purse while you’re at it?
8% from the 4% of last years April. At least the average of 6% cleared the 2% mark!
This month will be the last freebie from the 2020 halt. June needs to be lower to indicate a somewhat functioning economy from 2020 and the 2 years out is realistic.
2.5 rates to neutralize inflation growth is what many fed offer the rest is unspoken.
What to do when food prices are rising — buy the food guys. I’ve got four with more to come. Beating the market.