In April, a decrease in the inflation rate was recorded in the United States, which was not just economic news, but a kind of source of the positive for local citizens, who have recently faced increasing price pressure and lack of significant prospects for improving the economic situation.
Data on the growth in the cost of goods and services in the US in March turned out to be disappointing. Against this background, forecasts regarding the prospects of the local economic system as a whole have deteriorated and expectations regarding interest rate cuts by the Federal Reserve have changed significantly. The April data turned out to be more positive. At the same time, in this case, there is no reason to talk about a fundamental change in the dynamic of the inflation indicator.
Last month, consumer prices in the United States showed an increase of 3.4% year-on-year. In March, the corresponding indicator grew by 3.5%.
The April data was released on Wednesday, May 15, by the Bureau of Labor Statistics.
Last month, the so-called core consumer price index, which does not include food and energy costs, rose 0.3% compared with the indicator for March. It is worth noting that two months earlier, the upward dynamic rate of this figure was 0.4%.
FactSet’s consensus forecast predicted that the core consumer price index would rise by 0.4% month-on-month in April. Also in this case, it was expected that consumer prices last month would show an increase of 3.4% compared to the indicator for the same period in 2023.
Official data show that the growth in gasoline and shelter costs in April accounted for more than 70% of the monthly rise in overall inflation. At the same time, the increased cost of housing and high prices at the pump continue to be a factor of sensitive economic impact on residents of the United States.
The cost of groceries in the US in April fell by 0.2% compared to the indicator for March. It is worth noting that this figure appeared on a downward trajectory for the first time since the beginning of the current year.
The official data released on Wednesday are mostly in line with economists’ preliminary expectations. This fact is definitely positive after the consumer price index in January, February, and March showed consistent growth, exceeding experts’ forecasts. At the same time, it is too early to say that the tendency of the inflationary dynamic has changed in the United States. The April data may turn out to be a kind of positive episode in a series of negative indicators that do not coincide with the more positive expectations of analysts. At the same time, the probability that the inflation process in the United States has returned to a steady slowdown trajectory does not belong to the category of unrealistic scenarios.
Erica Groschen, a former BLS commissioner who serves as senior economics adviser at the Cornell University School of Industrial and Labor Relations, said in a media comment that over the past month or two it seemed that the improvement had stalled, but the data for April indicate that the corresponding tendency seems to be continuing, but at a slow pace.
At the same time, the Fed needs more significant indicators reflecting substantial progress in countering inflation. Without the relevant data, the financial regulator of the United States will not be able to decide on the long-awaited cutting of interest rates. Currently, the cost of borrowing in the US is at a level corresponding to a 23-year high. It is worth noting that for several years the central bank of the United States has been implementing a strategy to aggressively raise interest rates. This concept of action was aimed at mitigating the economic consequences of weak consumer demand and coping with inflation, which was on a consistent growth trajectory.
It is worth noting that the United States has already managed to make some progress in countering the increase in the cost of goods and services. In June 2022, inflation in the US peaked at 9.1%. At the same time, the United States economic system continued to demonstrate resilience.
Also, a separate official report released on Wednesday showed that retail sales in the US remained at the same level in April.
John Sedunov, professor of finance and real estate at Villanova University, did not rule out the possibility that consumers in the United States began to change behavior in the context of the approach to expenditures. According to the expert, the retail softening is an indicator that, perhaps, in the future, the pressure on price figures in certain areas will be going forward, which may become a factor of further moderating effect on inflation.
Kathy Jones, Charles Schwab’s chief fixed-income strategist, says that the April data really generates the likelihood that later this year the central bank of the United States will begin implementing a monetary easing strategy, which implies cutting interest rates. According to the expert, for the financial regulator to start acting in the corresponding direction, several more such positive reports are needed.
Experts Anna Wong, Stuart Paul, and Estelle Ou say that the April data is likely to strengthen the Fed’s confidence in progress in the fight against inflation. At the same time, they said, the corresponding confidence of the central bank of the United States is currently probably weaker than at the beginning of 2024. Experts also said that the April consumer price index should keep the chance of starting to cut interest rates in July.
As we have reported earlier, JPMorgan CEO Urges United States to Deal With Its Deficit Sooner Rather Than Later.
