US inflation falls from 4-decade high, but still causes pain

WASHINGTON – Inflation eased slightly in April after months of relentless increases, but remained near a four-decade high, making it difficult for millions of American households to keep up with rising prices.

Consumer prices rose 8.3% last month from a year earlier, the government said on Wednesday. That was down from an 8.5% year-over-year increase 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.

Those price jumps “make it clear that there is still a long way to go before inflation returns to more acceptable levels,” said Eric Winograd, a US economist at asset manager AB.

Even if it moderates, inflation is likely to remain high well into 2023, economists say, leaving many Americans burdened by price increases that have outpaced wage increases. Black and Hispanic and low-income families are particularly hard hit, since, on average, they spend a higher proportion of their income on gas, food, and rent.

Wednesday’s report also highlighted challenges for the Federal Reserve and the White House as they struggle to control inflation.

In April, a drop in gasoline prices helped curb headline inflation. Nationwide, average prices for a gallon of gasoline fell to $4.10 in April, according to AAA, after rising to $4.32 in March. But since then, gas prices have risen to a record $4.40 a gallon.

Grocery prices also continue to rise, in part because the Russian invasion of Ukraine has increased the cost of wheat and other grains. Food prices increased 1% from March to April and almost 11% from a year earlier. That year-over-year increase is the largest since 1980.

Such rapid inflation has prompted many Americans to cut back on spending. Among them is Patty Blackmon, who said she has driven to fewer of her grandchildren’s sporting events since gas went up to $5.89 in Las Vegas, where she lives.

To save money, Blackmon, 68, has also not visited his hairdresser in 18 months. And he’s reconsidering his plan to drive this summer to visit relatives in Arkansas. He was surprised recently, she said, to see a half-gallon of organic milk fetching $6.

“Holy Cow!” she thought. “How do parents give their children milk?”

Blackmon has cut back on meat and “a steak is almost out of the question,” he said. Instead, he is eating more salads and canned soups.

Likewise, David Irby of Halifax, Virginia, said he has been cutting back on food and other higher-cost expenses. A veteran who retired on disability in 2015, Irby, 57, said he switched from beef to chicken and stopped buying bacon or junk food, like his favorite treat, Cheetos.

Irby’s biggest concern? Replacement for his 22 year old Ford Pickup which is no longer reliable on long trips. A new one costs $50,000. Even a 5 year old used version costs around $40,000.

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

The turmoil 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. So could US gas prices and China’s COVID lockdowns could worsen supply chain grunts.

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

Southwest Airlines said last month that it expects much higher revenue and profit this year as Americans flood airports after postponing travel for two years. Southwest said its average rate soared 32% in the first three months of the year from the same period last year.

However, there are signs that supply chains are improving for some products. Wednesday’s report showed home appliance and clothing prices fell 0.8%, while the cost of used cars fell 0.4%, the third drop in a row. Used cars and other goods drove much of the initial rise in inflation last year, as Americans stepped up spending after vaccinations became widespread.

Inflation also poses a serious political problem for President Joe Biden and congressional Democrats in the midterm election season, with Republicans arguing that Biden’s $1.9 trillion financial support package last March overheated the economy by flooding it with stimulus checks, enhanced unemployment aid, and the child tax credit. Payments

On Tuesday, Biden sought to take the lead, declaring inflation “the number one problem facing families today” and “my top national priority.”

Earlier signs that US inflation might be peaking did not last. Price increases slowed last August and September, suggesting at the time that higher inflation might be temporary, as many economists and Fed officials had suggested. But prices spiked again in October, leading to the Fed Chairman Jerome Powell to begin shifting policy toward higher rates.

Wednesday’s figures will keep the Fed on track to implement what may become its fastest series of interest rate hikes in 33 years, economists said. Last week, the central bank raised its benchmark short-term rate by half a point, its steepest increase in two decades. And Powell noted that more such rate hikes are on the way.

Powell’s Fed is trying to accomplish the notoriously difficult and risky task of cooling the economy enough to curb inflation without causing a recession. Economists say such an outcome is possible but unlikely with inflation this high.

One of the Fed’s concerns is that Americans could start to expect chronically high inflation, which may make rising prices more difficult to control because such expectations may be self-fulfilling. If Americans expect costs to rise, they are likely to demand higher wages. Those higher labor costs, in turn, can force companies to charge more, which increases inflation.

So far, measures of longer-term inflation expectations have been largely kept in check even as prices have soared. Still, some people are beginning to push for higher wages as prices rise.

“We haven’t had any inflation-based raises yet, and we think we should because inflation is so high right now,” said Rochelle Guillou, 26, referring to her and her friend Hannah Lerman, who work at a startup in Boston.

Lerman, 25, said she thinks the cost of everything from food to online delivery services to clothing is rising.

“Rent is a big problem,” he said. “In fact, they are trying to sell my building right now, so we know our rent will go up. We don’t even know how much, but yeah, the rent is going crazy.”

———

AP writers Anne D’Innocenzio in New York and Steve LeBlanc in Boston contributed to this report.

Add Comment