The inflation numbers for the month of April are out and, as has been the case for almost a year now, remain persistently high. The Consumer Price Index (CPI), a basket of goods and services commonly used to measure inflation, was up 0.3% from March, and 8.3% from April of 2021, a slight deceleration from the 8.6% increase recorded in March. Among the primary drivers for the month were food prices, up 9.4% from the year prior and 0.9% from March, new cars, up 13.2% from the year prior and 1.1% from March, and transportation services, up 8.5% from the year prior and 3.1% from March. Food prices rose as supply chains continued to be squeezed, the war in Ukraine threatens wheat production, and an avian flu outbreak reduced the supply of poultry and eggs. New car prices continue to be inflated by shortages of semiconductors that are squeezing dealer supplies, allowing them to charge more for their vehicles. Transportation services passed along last month’s sharp rise in fuel prices to consumers, driving cost increases in that sector. The deceleration was primarily driven by decreases in energy prices, as gasoline dropped off sharply, down 6.1% from March when prices jumped due to the Russian invasion of Ukraine. Aside from energy, apparel, and used cars, all sectors measured by the CPI were higher in April. While the deceleration in inflation is a positive sign that we may have, in fact, hit peak pricing increases, it is important to note that much of the slowdown was due to the drop in energy prices, which along with food, are the two most volatile components of the CPI calculation. For example, while gas prices experienced a decrease in April, they are currently back up to all-time highs in May, which indicates that inflation may tick back up in the next report.
Another measure of inflation that may help provide a look at where the CPI is headed is the Producer Price Index (PPI). The PPI measures the average change in the selling prices received by producers. In the month of April, the PPI increased 0.5% from March and 11.0% from April of 2021. This was a significant deceleration in month-over-month prices and a mild deceleration in year-over-year prices. The month-over-month reading of 0.5% was the lowest level since December. It was primarily driven by slowdowns of increasing producer costs for food, energy, and warehousing and a decline in trade, which was the sole component of the index to decrease for the month. The decrease in trade may indicate that demand is slowing, something the Federal Reserve is seeking to achieve by raising interest rates to cool inflation. While inflation overall remains high and a strain on consumers, the decelerating rate for the first time since August is a welcome sign.