US inflation drops from 4-decade high but continues to cause pain

WASHINGTON (AP) — Inflation slowed in April after seven months of relentless gains, a tentative sign that price increases could peak while putting financial pressure on U.S. households.

Consumer prices jumped 8.3% last month from a year ago, the government said on Wednesday.. This was lower than the 8.5% year-on-year rise in March, which was the highest since 1981. On a monthly basis, prices rose 0.3% from March to April, the smallest increase in eight months.

Still, Wednesday’s report contained warning signs that inflation could take root further. Excluding the volatile food and energy categories, so-called core prices jumped twice as much from March to April as the previous month. The increases were fueled by soaring prices for airline tickets, hotel rooms and new cars. Apartment rental costs also continued to rise.

These price increases “clearly show that there is still a long way to go before inflation returns to more acceptable levels,” said Eric Winograd, US economist at Asset Manager AB.

Even if it moderates, inflation is likely to remain high through 2023, economists say, leaving many Americans burdened with price increases that have outpaced wage increases. Low-income families and black and Hispanic families are particularly affected, who are disproportionately squeezed by more expensive food, gas and rent.

So far, a drop in gasoline prices in April has helped to slow headline inflation. Nationally, average prices for a gallon of gasoline fell to $4.10 in April, according to AAA, after hitting $4.32 in March. But since then, gasoline prices have soared to a record $4.40 a gallon.

Grocery prices are still rising, in part because Russia’s invasion of Ukraine has increased the cost of wheat and other grains. Food prices rose 1% from March to April and nearly 11% from a year ago. This year-over-year increase is the largest since 1980.

The turbulence abroad could accelerate inflation in the coming months. If the European Union, for example, decides to ban imports of Russian oil, world oil prices could rise. Just like gas prices in the United States. And China’s COVID lockdowns could compound supply chain issues.

In April, airfares hit a record 18.6%, the biggest monthly increase since records began in 1963. Hotel prices jumped 1.7% from March to April.

Southwest Airlines said last month that he expects much higher revenue and profits this year as Americans flood airports after postponing travel for two years. The company said its average price jumped 32% in the first three months of the year from the same period last year to $159.

There are signs that supply chains are improving for certain products. Wednesday’s report showed prices for home appliances and clothing both fell 0.8%, while the cost of used cars fell 0.4%, the third straight drop. Used cars and other goods were behind much of last year’s initial inflation spike as Americans increased spending after vaccines became widespread.

Escalating consumer inflation has forced many Americans, especially those on low or fixed incomes, to cut back on expenses like driving and groceries. Among them is Patty Blackmon, who said she’s been driving fewer of her grandchildren’s sporting events since gasoline soared to $5.89 in Las Vegas, where she lives.

To save money, Blackmon, 68, has also not been to her hairdresser for 18 months. And she’s reconsidering her plan to drive this summer to visit relatives in Arkansas.

She was shocked recently, she said, to see half a gallon of organic milk fetch $6.

“Holy cow!” she thought. “How do parents give milk to their children? »

Blackmon has reduced her meat intake and “a steak is almost out of the question,” she said. Instead, she eats more canned salads and soups.

David Irby, 57, of Halifax, Va., said he was also cutting food and other expenses. A veteran who retired on disability in 2015 as a police officer, Irby said he switched from beef to chicken, stopped buying bacon and doesn’t buy bacon. junk food like his favorite treat, Cheetos.

Irby’s biggest concern is replacing his 22-year-old Ford truck, which is unreliable on long trips. A new one costs $50,000 while a five-year-old used version costs around $40,000.

“I don’t know how people on fixed incomes can buy a vehicle now,” he said. “It takes me almost two years to make $40,000.”

Beyond the financial strain on households, inflation poses a serious political problem for President Joe Biden and congressional Democrats in the midterm election season, with Republicans saying the 1 $.9 trillion from Biden last March overheated the economy. flooding it with stimulus checks, enhanced unemployment benefits and child tax credit payments.

On Tuesday, Biden sought to seize the initiative and declared inflation “the No. 1 problem facing families today” and “my top national priority.”

Previous signs that US inflation could peak did not last. Price increases slowed last August and September, suggesting at the time that higher inflation might be temporary, as many economists – and Federal Reserve officials – had suggested. But prices rose again in October, prompting Fed Chairman Jerome Powell to start shifting policy towards higher rates.

Wednesday’s numbers will keep the Fed on track to implement what could become its fastest streak of interest rate hikes. in 33 years, according to economists. Last week, the Fed raised its short-term policy rate by half a point, its largest increase in two decades. And Powell signaled that more rate hikes just as steep are to come.

The Fed Powell is looking to accomplish the notoriously difficult – and risky – task of cooling the economy enough to slow inflation without causing a recession. Economists say such an outcome is possible but unlikely with such high inflation.


Associated Press writer Anne D’Innocenzio in New York contributed to this report.

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