Inflation Rate Slows to 8.3 Percent, Remains Near 40-Year High

Inflation Rate Slows to 8.3 Percent, Remains Near 40-Year High
Grocery shopping in Rosemead, Calif., on April 21, 2022. (Frederic J. Brown/AFP via Getty Images)
Andrew Moran

The U.S. annual inflation rate slowed marginally to 8.3 percent in April, higher than the market forecast of 8.1 percent. This is the first time the consumer price index (CPI) has fallen year-over-year since August 2021.

While inflation has declined from its March peak of 8.5 percent, it remains near a 40-year high.

According to data from the Bureau of Labor Statistics (BLS), the core inflation rate, which excludes the volatile food and energy sectors, jumped 6.2 percent, topping economists’ expectations of 6 percent. A significant increase in airline fares and hotel rates, as well as rising housing costs, pushed core inflation higher.

On a month-over-month basis, inflation rose 0.3 percent, and core inflation jumped 0.6 percent.

It was still a broad-based inflation report, with the main indexes up from the same time a year ago.

Food prices surged 9.4 percent, while energy prices soared 30.3 percent. New vehicles advanced 13.2 percent, and used cars and trucks surged 22.7 percent. Shelter costs, which account for almost one-third of the CPI, increased 5.1 percent, the fastest pace since May 1991.

Transportation services climbed 8.5 percent. Airline fares continued to increase substantially in April, rising 18.6 percent, the highest one-month increase since the series began in 1963. Annually, airline fares increased by 33.3 percent, the biggest 12-month gain since December 1980.

Within the food index, meat prices skyrocketed 13.9 percent annually, including beef and veal (14.3 percent), pork (13.7 percent), ham (8.8 percent), and chicken (16.4 percent). Egg prices increased by 22.6 percent, while milk prices rose by 14.7 percent.

Coffee prices surged 13.5 percent, with roasted coffee rising 14.7 percent.

On the energy front, fuel oil jumped by 80.5 percent, gasoline spiked 43.6 percent, and electricity costs surged 11 percent.

Hotel rates rose by 22.6 percent on an annual basis.

People shop at a grocery store in Monterey Park, Calif., on April 12, 2022. (Frederic J. Brown/AFP via Getty Images)
People shop at a grocery store in Monterey Park, Calif., on April 12, 2022. (Frederic J. Brown/AFP via Getty Images)
U.S. stocks fell on May 11, resuming their sell-off, led by an about 3 percent decline in the Nasdaq. The Nasdaq Composite fell 370.94 points, or about 3.2 percent, to 11,366.73, the Dow Jones Industrial Average fell 325.42 points, or about 1 percent, to 31,835.32, and the S&P 500 lost 65.51 points, or about 1.6 percent, to end at 3,935.54 points.

Inflation Forecasts

Despite elevated inflation and higher-than-expected figures, many market analysts anticipate that inflationary pressures will ease toward the end of the year and heading into 2023, including the CPI and the Federal Reserve’s preferred gauge, the personal consumption expenditure (PCE) price index.

According to Mark Gardner, the president of wealth management firm Retire Well Dallas, the Fed’s favorite inflation measurement is forecast to decline to 4.3 percent by the end of the year and then drop to 2.8 percent by the end of 2023.

With the central bank raising interest rates and potentially exhausting pent-up demand, moderation might be coming soon, says Peter Tanous, the founder and chairman of Lynx Investment Advisory.

“One silver lining that is not much talked about is the fact that a great deal of the surge in demand by consumers is the result of the pent-up demand by Americans who were locked up during the Coronavirus with no place to go and little to spend their money on. The surge in spending is contributing to high inflation, but it may not last,” Tanous told The Epoch Times.

“The boost in pent-up demand is arguably temporary and higher interest rates will also contribute to a reduction in demand as purchases become increasingly more expensive to finance. If so, a moderation of the inflationary boom may be in sight.”

Should consumer and business demand dissipate amid sky-high inflation and rising rates, some economists say recession risks could swell into 2023.

Looking ahead, the U.S. economy could be going through a “transition period” that is caused by de-globalization efforts and a negative supply shock, Deutsche Bank said in a recent research note.

“The highly uncertain nature of such transition is poised to keep inflation risk premium elevated for the foreseeable future,” the financial institution stated.

The next major economic report will be the producer price index (PPI). The PPI, which will be published on May 12, is forecast to come in at 10.7 percent, down from the 11.2 percent jump in March.

In its latest bi-annual financial stability report, the central bank warned that an uptick in interest rates to combat inflation would pose a risk to the post-crisis economy, adding that conditions in the financial markets could deteriorate fast.

The Fed cautioned that consumers could endure higher rates, lower real estate prices, and job losses. But the private sector could experience bankruptcies, delinquencies, and “other forms of financial distress.”

“Further adverse surprises in inflation and interest rates, particularly if accompanied by a decline in economic activity, could negatively affect the financial system,” the central bank stated. “A sharp rise in interest rates could lead to higher volatility, stresses to market liquidity and a large correction in prices of risky assets, potentially causing losses at a range of financial intermediaries.

President Joe Biden speaks about inflation and the economy in the South Court Auditorium on the White House campus in Washington on May 10, 2022. (Drew Angerer/Getty Images)
President Joe Biden speaks about inflation and the economy in the South Court Auditorium on the White House campus in Washington on May 10, 2022. (Drew Angerer/Getty Images)

‘Top Domestic Priority’

President Joe Biden emphasized his administration’s policies to tackle soaring inflation, telling reporters that higher prices are his “top domestic priority.” He touched upon some of the White House’s latest efforts, such as releasing 1 million barrels per day of oil from the Strategic Petroleum Reserve for the next six months and clearing the backlog of goods at the nation’s ports.

“I know that families all across America are hurting because of inflation,” Biden said on May 10. “I want every American to know that I am taking inflation very seriously, and it’s my top domestic priority.

“My plan is already in motion.”

During his speech, Biden repeated his “false claims” that Republicans in Congress want to raise taxes on the middle class. He referred to the 11-point plan proposed by Sen. Rick Scott (R-Fla.), calling it an “ultra-MAGA” proposal.

Scott on May 10 urged Biden to step down to help solve the inflation problem.

“The most effective thing Joe Biden can do to solve the inflation crisis he created is resign. He’s the problem,” Scott said in a statement. “Joe Biden is unwell. He’s unfit for office. He’s incoherent, incapacitated, and confused. He doesn’t know where he is half the time. He’s incapable of leading and he’s incapable of carrying out his duties.”

Biden has been losing the support of the public, with the latest Economist/YouGov survey showing that only 43 percent of Americans approve of the way he is handling the economy (pdf).
Andrew Moran has been writing about business, economics, and finance for more than a decade. He is the author of "The War on Cash."
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