US Consumer Price Index Dragging Behind Estimates

The core consumer price index is a key measure of the US economy as it attempts to measure average every day spending outside of daily needs; therefore it does not include energy or food.  Looking at April’s numbers, we see the core consumer price index, in April, increased but at a far lower rate than expected. The disappointing growth comes mostly on lower costs from used cars and apparel.  

Overall, the index rose 0.1 percent over the month prior—slightly missing estimates—but still up 2.1 percent from the same period last year.  The United States Department of Labor, then, reports that the broader consumer price index grew 0.3 percent monthly and 2 percent on an annual basis. Both figures were lower than had been expected. 

Last month, the Consumer Price Index increased 0.3 percent, mostly on rising rent, healthcare, and gasoline prices.  This follows a CPI gain of 0.4 percent in March. Overall, it contributes to a 2.0 percent increase in April, year-over-year. 

In addition, energy prices increased nearly 3 percent with gasoline prices jumping 5.7 percent.  Alternately, food costs fell 0.1 percent as medical care increased 0.3 percent.  Apparel prices dropped 0.8 percent in April, after an even steeper drop of 1.9 percent in March: the biggest since 1949.

Analysis of this data suggests, then, inflation pickup might remain a mystery for a little longer. And this is even at a time when consistent wage gains and the lowest jobless rate in 49 years should be propping up growth.  Of course, prices could get a bump in the next few months after we account for new tariffs issued by US President Donald Trump on Chinese imports. 

Indeed, Federal Reserve Chairman Jerome Powell advises that the central bank has not felt the urge to change interest rates or monetary policy.  The weak inflation readings, he said, “may wind up being transient.” 

Still, the softness is persistent and that means the Fed could retract this “transitory” statement at any time. After all, the three-month annualized change in this core measure was only 1.6 percent. That is the lowest count for this measure in nearly two years.  

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