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Is the worst over? Inflation slows from 40- year high

- Paul Davidson

Inflation stayed elevated in April but eased off its 40- year high, signaling that a stomach- churning surge in consumer prices since last summer may have peaked.

The consumer price index increased 8.3% annually, down from 8.5% in March, as a drop in gasoline prices offset a continuing run- up in food, rent and other costs, the Labor Department said Wednesday. March’s yearly advance marked the fastest since December 1981.

April’s pullback in the annual reading was the first since last August and halted five straight months of 40- year highs. But hold off on that shopping spree. Overall consumer prices edged up 0.3% from March.

Much of the slowdown in the yearly measure reflected a 6.1% monthly drop in gas prices. Pump costs, however, shot higher again this month. Regular unleaded hit a record $ 4.37 a gallon Tuesday, up from $ 4.12 a month ago, according to AAA.

Rick Kiphut, of Memphis, Tennessee, his wife and two teenage daughters planned to tow their camper to the Great Lakes in Michigan in July, as

they did last year, for a 10- day vacation. But the 3,300- mile trip will cost an extra $ 550 or so in gas, so they decided to skip it this year.

“It’s not fiscally responsibl­e,” he says.

Annual inflation slowed in April partly because prices began ratcheting higher a year ago, making the latest numbers appear not as outsized by comparison.

One worrisome sign: Core consumer prices, which exclude volatile food and energy items, increased 0.6% from the prior month, more sharply than expect

ed. The annual rise eased to 6.2% from a four- decade high of 6.5% in March.

“The falls in headline and core inflation in April should mark the beginning of a sustained decline,” economist Andrew Hunter of Capital Economics wrote in a note to clients, but the monthly rise in core prices “indicates that underlying inflation pressures are

stronger than we had expected.”

Tuesday, President Joe Biden called inflation the nation’s top economic challenge, blaming the twin crises of a “once- in- a- century pandemic” and the war in Ukraine.

“I want every American to know that I’m taking inflation very seriously, and it’s my top domestic priority,” Biden said.

As the pandemic eased this year, consumer purchases started to shift from goods to services, such as dining out and traveling, says Wells Fargo economist Sam Bullard. The developmen­t started to mitigate the supply chain bottleneck­s behind much of the inflation spike.

That has begun moderating increases in the price of furniture, appliances and other items. Used car prices dipped 0.4% in April after a 3.8% decline the previous month, though they’re still up 22.7% from a year ago. Clothing prices fell 0.8% monthly, lowering the annual rise to 5.4%.

Grocery costs jumped 1% monthly and 10.8% from a year ago. Air fares surged 18.6% in April and were up 33.3% the past 12 months. Rent climbed 0.6% monthly and 4.8% from a year ago.

In other words, hurdles still loom. COVID- 19- related factory shutdowns in China raised the risk of further supply disruption­s, Bullard says.

Russia’s war in Ukraine pinches global oil and food supplies and intensifies supply snarls, pushing up prices. Ukraine accounts for about 8% of global wheat exports. Breakfast cereal prices rose 2.4% in April and are up 12.1% from a year ago, and bread costs increased 2% and 9.1% yearly.

Proteins kept marching higher. Pork chop prices rose 1.9% monthly and 14% annually. Chicken costs increased 3.4% and 16.4% over the year. Fish was up 0.9% and 13% annually.

Julie Malkin of Toledo, Ohio, says she and her family replaced grilling favorites such as pork chops, steak, salmon and shrimp with burgers, sloppy joes, homemade chili and pasta.

“Prices are ridiculous,” she says. “It’s frustratin­g.”

Consumers’ pivot to more spending on services, along with worker shortages that propelled wages higher, drive up a different set of prices. Besides the

leap in air fares, hotel rates increased 1.7%, pushing the yearly rise to 19.7%.

Barclays expects annual inflation to ease to a still- high 5.7% by year’s end and 2% – the Federal Reserve’s target – by the end of 2023.

“The eventual descent in the pace of inflation will be very gradual,” says economist Kathy Bostjancic of Oxford Economics.

To curtail inflation, the Fed raised its key short- term interest rate by a half percentage point last week – the most in 22 years – and tentativel­y plans two more hikes in June and July.

Wednesday’s report will probably “strengthen the Fed’s resolve” to follow through with rate increases, says Hunter of Capital Economics.

“The falls in headline and core inflation in April should mark the beginning of a sustained decline.” Andrew Hunter Capital Economics

 ?? NICHOLAS KAMM/ AFP VIA GETTY IMAGES ?? President Joe Biden says he comes from a family that “felt it” when prices rose.
NICHOLAS KAMM/ AFP VIA GETTY IMAGES President Joe Biden says he comes from a family that “felt it” when prices rose.

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