The Manila Times

US inflation dips from 40-year high

WASHINGTON, D.C.: Inflation in the United States eased slightly in April after months of relentless increases, but remained near a four-decade high, making it hard for millions of American households to keep up with surging prices.

Consumer prices jumped 8.3 percent last month from a year earlier, the government said in a report on Wednesday (Thursday in Manila). That was below the 8.5-percent year-on-year surge in March, which was the highest since 1981. Month on month, prices rose 0.3 percent from March to April, the smallest increase in eight months.

Still, the report contained some cautionary signs that inflation may be becoming more entrenched. Excluding the volatile food and energy categories, so-called core prices jumped twice as much from March to April as they did the previous month. The increases were fueled by spiking prices for airline tickets, hotel rooms and new cars. Apartment rental costs also kept rising.

Those price jumps “make 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 pay raises. Especially hurt are lower-income and Black and Hispanic families, who on average spend a greater proportion of their incomes on gas, food and rent.

Wednesday’s report also underscored the challenges for the Federal Reserve (Fed) and White House in their struggles to tame inflation.

In April, a fallback in gas prices helped slow overall inflation. Nationally, average prices for a gallon of gas fell to as low as $4.10 in April, according to the American Automobile Association, after having spiked to $4.32 in March. But since then, gas prices have surged to a record $4.40 a gallon.

Grocery prices, too, are still soaring, in part because Russia’s invasion of Ukraine has heightened the cost of wheat and other grains. Food prices rose 1 percent from March to April and nearly 11 percent from a year ago. That year-on-year increase is the biggest since 1980.

Turmoil overseas could potentially accelerate inflation in the coming months. If the European Union, for example, decides to bar imports of Russian oil, world oil prices could rise. So could US gas prices. And China’s Covid-19 lockdowns could worsen supply chain snarls.

Last month, airfares soared a record 18.6 percent, the largest monthly increase since recordkeeping began in 1963. And hotel prices jumped 1.7 percent from March to April.

The report also showed signs

that supply chains are improving for some goods. Prices for appliances and clothing both fell 0.8 percent, while the cost of used cars dropped 0.4 percent, its third straight decline. Used cars and other goods drove much of the initial inflation spike last year as Americans stepped up spending after vaccines became widespread.

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

such sharp rate hikes are coming.

The Fed is seeking to pull off the notoriously difficult — and risky — task of cooling the economy enough to slow 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 might start to expect

chronically high inflation, which can make rising prices harder to bring under control because such expectations can be self-fulfilling.

If Americans expect costs to rise, they are likely to demand higher pay. Those higher labor costs, in turn, can force companies to charge more, thereby heightening inflation.

Foreign Business

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2022-05-13T07:00:00.0000000Z

2022-05-13T07:00:00.0000000Z

https://digitaledition.manilatimes.net/article/281913071706187

The Manila Times