Inflation dips from four-decade high, still causing pain

 

WASHINGTON (AP) - Inflation slowed in April after seven months of unstoppable increases. This is a tentative sign that price increases may have peaked, although they are still a financial burden on American households.

The government said Wednesday that consumer prices rose 8.3% last month from a year earlier. That was down from the 8.5% increase in March, the highest since 1981. On a monthly basis, prices rose 0.3% from March to April, the smallest increase in eight months.

Still, Wednesday's report contained some troubling signs that inflation may be firming. Excluding the volatile food and energy categories, so-called core prices rose twice as much from March to April as in the previous month. The price increase was fueled by rising prices for airline tickets, hotel rooms and new cars. The cost of residential rents also continued to rise.

These price jumps "make it clear that there is still a long way to go before inflation returns to acceptable levels," said Eric Winograd, U.S. economist at asset manager AB.

Even if it does moderate, inflation will likely remain high well into 2023, economists say, leaving many Americans burdened by price increases that outpace wage increases. Low-income families and black and Hispanic families will be particularly hard hit, disproportionately affected by more expensive food, gasoline and rent.

The drop in gasoline prices in April has slowed overall inflation for now. According to AAA, average prices for a gallon of gasoline fell as low as $4.10 in April after rising to $4.32 in March. Since then, however, gasoline prices have risen to a record $4.40 per gallon.

Food prices continue to rise, in part because Russia's invasion of Ukraine has driven up the cost of wheat and other grains. Food prices rose 1% from March to April and nearly 11% from a year ago. This is the largest year-on-year increase since 1980.

Overseas unrest could accelerate inflation in the coming months. For example, if the European Union decides to cut off imports of Russian oil, world oil prices could rise. So could gasoline prices in the United States. And China's COVID blockages could further complicate supply chains.

Airfares rose a record 18.6% in April, the largest monthly increase since records began in 1963, and hotel prices rose 1.7% from March to April.

Southwest Airlines said last month it expects significantly higher revenue and profits this year as Americans flood airports after putting off travel for two years. The company said its average airfare rose 32% to $159 in the first three months of the year from the same period last year.

There are signs that supply chains for some goods are improving. Wednesday's report showed prices for home appliances and apparel each fell 0.8%, while the cost of used cars fell 0.4%, the third straight decline. Used cars and other goods were responsible for much of the initial rise in inflation last year as Americans increased spending following the introduction of vaccines.

The rise in consumer inflation has forced many Americans, especially those on low or fixed incomes, to reduce their spending on things like driving and grocery shopping. That includes Patty Blackmon, who says she is driving less to her grandchildren's sporting events since the price of gasoline rose to $5.89 in Las Vegas, where she lives.

To save money, Blackmon, 68, also has not visited her hairdresser in 18 months. And she's rethinking her plan to visit relatives in Arkansas this summer.

She was shocked to see recently that a half-gallon of organic milk costs $6. "Holy cow!" she thought, "How can parents give their kids milk?"

Blackmon has cut back on meat consumption, and "steak is almost out of the question," she said. Instead, she now eats more salads and canned soups.

David Irby, 57, of Halifax, Virginia, said he also cuts back on food and other expenses. A veteran who retired on disability in 2015, Irby said he has switched from beef to chicken, stopped buying bacon and does not buy junk food like his favorite snack, Cheetos.

Irby's biggest concern is replacing his 22-year-old Ford truck, which is no longer reliable on long trips. A new one costs $50,000, while a five-year-old used version costs about $40,000.

"I do not know how people on a fixed income can buy a vehicle now," he said. "It takes me almost two years to make $40,000."

Beyond the financial burden on households, inflation poses a serious political problem for President Joe Biden and congressional Democrats as the midterm elections approach. Republicans argue that Biden's $1.9 trillion fiscal package last March overheated the economy by flooding it with stimulus checks, increased unemployment benefits and child tax credits.

On Tuesday, Biden sought to seize the initiative, declaring inflation the "No. 1 problem facing families today" and "my top domestic priority."

Earlier signs that inflation may have peaked in the U.S. did not last. Price increases slowed in August and September of last year, suggesting at the time that higher inflation might be.

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