Key Takeaways From This Week’s Consumer Price Index (CPI) and Producer Price Index (PPI) Reports
- Consumer Price Index (CPI)
- Core consumer prices, excluding volatile food and energy, rose 0.4% in April, a significant increase compared to pre-pandemic levels
- CPI increased by 0.4 percent in April, with a 4.9 percent rise over the past 12 months
- Food prices remained unchanged, while energy prices experienced a 0.6 percent increase
- Shelter, used cars and trucks, and personal care contributed to the rise in CPI, while airline fares and new vehicles declined
- Consumer prices exhibit a mixed pattern, with improvements in some categories offset by concerns in others, resembling a game of whack-a-mole
- Producer Price Index (PPI) Report
- The Producer Price Index for final demand increased by 0.2% in April, following a 0.4% decrease in March.
- On an unadjusted basis, the index for final demand rose by 2.3% for the 12 months ended in April.
- Prices for final demand services rose by 0.3% in April, accounting for 80% of the overall increase in the index.
- Prices for final demand goods increased by 0.2% in April.
- Prices for final demand excluding foods, energy, and trade services rose by 0.2% in April and increased by 3.4% over the past year
Overall Consumer Price Index Increase (CPI):
Overall CPI rose by 0.4% in April on a seasonally adjusted basis, following a 0.1% increase in March. Over the past 12 months, the all items index increased by 4.9% before seasonal adjustment.
Major Contributors to Monthly Increase (CPI):
The shelter index was the largest contributor to the monthly increase in CPI, followed by increases in the index for used cars and trucks and the for gasoline. The increase in gasoline prices more than offset declines in other energy component indexes.
Food Prices (CPI):
The food index was unchanged in April, as it was in March. The index for food at home fell by 0.2% over the month, while the index for food away from home rose by 0.4%.
Core Inflation (CPI):
The index for all items less food and energy rose by 0.4% in April, consistent with the increase in March. Prices for shelter, used cars and trucks, motor vehicle insurance, recreation, household furnishings and operations, and personal care contributed to the increase, while prices for airline fares and new vehicles decreased.
Annual Inflation Rate (CPI):
Over the last 12 months, the all items index increased by 4.9%, which marks the smallest 12-month increase since April 2021. The index for all items less food and energy rose by 5.5% over the same period, while the energy index decreased by 5.1%, and the food index increased by 7.7%.
Housing and Shelter (CPI):
The shelter index, which includes rent and owners’ equivalent rent, increased by 0.4% in April, contributing significantly to the overall increase in all items less food and energy. The shelter index rose by 8.1% over the past year, accounting for a substantial portion of the total increase in this category.
Inflation in Medical Care (CPI):
The medical care index was unchanged in April, following a 0.3% decline in March. The index for hospital services rose by 0.5% over the month, while the prescription drugs index increased by 0.3%.
Price Dynamics for Final Demand Services (PPI):
In April, prices for final demand services rose by 0.3%, representing the largest increase since November 2022. This rise in prices was mainly driven by a 0.4% increase in the index for final demand services less trade, transportation, and warehousing. However, the index for transportation and warehousing services for final demand decreased by 1.7%. Overall, services contributed significantly to the increase in the PPI for final demand.
Price Dynamics for Final Demand Goods (PPI):
Prices for final demand goods increased by 0.2% in April, rebounding from a 1.0% decrease in March. The rise in prices was primarily influenced by an 0.8% increase in the index for final demand energy. However, the index for final demand foods decreased by 0.5%. The performance of final demand goods indicates a moderate upward pressure on prices in this sector.
Price Dynamics Excluding Foods, Energy, and Trade Services (PPI):
To get a clearer picture of underlying inflationary trends, it is important to analyze the PPI for final demand excluding foods, energy, and trade services. In April, prices for final demand excluding these components increased by 0.2%, following a 0.1% increase in March. Over the past year, this measure of core inflation rose by 3.4%, highlighting the presence of inflationary pressures in the economy.
Labor Market Softening and Jobless Claims:
In addition to the moderation in wholesale inflation, the labor market is also showing signs of softening. Jobless claims rose to the highest level since October 2021, indicating a potential slowdown in employment growth. While the overall unemployment rate remains low, the rise in jobless claims suggests a need for caution and close monitoring of labor market trends.
