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US Consumer Prices Rise, Underlying Inflation Benign

Published on May 13 2019 2:20 PM in Retail tagged: Trending Posts / US / Inflation / Consumer Prices

US Consumer Prices Rise, Underlying Inflation Benign

US consumer prices rose moderately in April and underlying inflation remained muted, suggesting the Federal Reserve could keep interest rates unchanged for a while.

The persistently benign inflation reported by the Labor Department could, however, increase White House pressure on the US central bank to cut rates.

President Donald Trump has repeatedly criticised the Fed for tightening monetary policy, arguing that inflation was low.

"Great Consumer Price Index just out. Really good, very low inflation! We have a great chance to 'really rock!' Good numbers all around," Trump tweeted after the report.

Interest Rates Unchanged

The Fed last week kept interest rates unchanged and signalled little desire to adjust monetary policy anytime soon. Fed Chairman Jerome Powell said he believed the weak inflation readings "may wind up being transient."

The Consumer Price Index increased 0.3% last month, lifted by rising gasoline, rents and healthcare costs. The CPI gained 0.4% in March. It increased 2.0% in the 12 months through April after advancing 1.9% in March.

Economists polled by Reuters had forecast the CPI increasing 0.45 in April and rising 2.1% year-on-year.

Excluding the volatile food and energy components, the CPI edged up 0.1% as apparel prices dropped for a second straight month. The so-called core CPI has now increased by the same margin for three straight months.

In the 12 months through April, the core CPI increased 2.1% after gaining 2.0% in March.

Inflation Target

The Fed, which has a 2% inflation target, tracks a different measure, the core personal consumption expenditures (PCE) price index, for monetary policy.

The core PCE price index increased 1.6% on a year-on-year basis in March, the smallest rise in 14 months, after advancing 1.7% in February. The April PCE price index data will be published later this month.

In April, gasoline prices rose 5.7%, accounting for more than two-thirds of the increase in the CPI last month, after surging 6.5% in March.

Food Prices

Food prices dipped 0.1% in April, the first drop since June 2017, after gaining 0.3% in the prior month. Food consumed at home dropped 0.5%, the largest decline since March 2016.

But consumers paid more for rent and healthcare. Owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, increased 0.3% last month after rising by the same margin in March.

Healthcare costs increased 0.3%, matching March's gain. There were increases in the cost of prescription medication and doctor visits. But the cost of hospital services fell 0.5%.

Apparel prices declined 0.8% last month. They plunged 1.9% in March, which was the biggest drop since January 1949, after the government introduced a new method and data to calculate apparel prices.

Prices for used motor vehicles and trucks fell 1.3%, decreasing for a third straight month. There were also declines in the cost of airline fares, alcoholic beverages and tobacco.

Prices for household furnishings fell for the first time in 10 months. The cost of new vehicles ticked up 0.1% after rising 0.4% in March.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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