Key inflation gauge slowed to still-high 6.3% over past year

May 27, 2022, 5:38 AM | Updated: May 29, 2022, 4:18 am

An inflation gauge closely tracked by the Federal Reserve rose 6.3% in April from a year earlier, the first slowdown since November 2020 and a sign that high prices may finally be moderating, at least for now.

The inflation figure the Commerce Department reported Friday was below the four-decade high of 6.6% set in March. While high inflation is still causing hardships for millions of households, any slowing of price increases, if sustained, would provide some modest relief.

The report also showed that consumer spending rose at a healthy 0.9% annual rate from March to April, outpacing the month-to-month inflation rate for a fourth straight time. The ongoing willingness of the nation’s consumers to keep spending freely despite inflated prices is helping sustain the economy. Yet all that spending is helping keep prices high and could make the Federal Reserve’s goal of taming inflation even harder.

“Inflation is finally slowing, but it’s a little early for high-fives,” said Bill Adams, chief economist at Comerica Bank.

Adams noted that gas and food prices have risen in May and that Russia’s war against Ukraine and COVID-19-related lockdowns in China could further disrupt supply shortages and send prices accelerating again.

Consumers’ resilience in the face of sharply higher prices suggests that economic growth is rebounding in the current April-June quarter. The economy shrank at a 1.5% annual rate in the first quarter, mostly because of an increase in the trade deficit. But analysts now project that, on an annual basis, it’s growing as much as 3% in the current quarter.

Americans have been able to keep spending, despite higher inflation, because of rising wages, a stockpile of savings built up during the pandemic and a rebound in credit card use. Economists say those factors could bolster spending and support the economy for much of this year.

Incomes rose 0.4% from March to April, Friday’s report showed, slightly faster than inflation. Still, high inflation is forcing consumers, on average, to save less. The savings rate fell to 4.4% last month, the lowest level since 2008. Overall, though, Americans have built up an additional $2.5 trillion in savings since the pandemic, and economists calculate that that pile is eroding only slowly.

Friday’s report showed that on a month-to-month basis, prices rose 0.2% from March to April, down from the 0.9% increase from February to March. The April increase was the smallest since November 2020.

Excluding the volatile food and energy categories, so-called core prices rose 0.3% from March to April, matching the previous month’s rise. Core prices climbed 4.9% from a year earlier, the first such drop since October 2020.

Still, inflation remains painfully high, and it’s inflicting a heavy burden in particular on lower-income households, many of them Black or Hispanic. Surging demand for furniture, appliances and other goods, combined with supply chain snarls, began sending prices surging about a year ago.

Consumers have shifted some of their spending from goods to services, like airline fares and entertainment tickets. That trend could help cool inflation in the months ahead, though it’s unclear by how much.

Goods prices, which were the major drivers of inflation last year, fell 0.2% from March to April after having jumped the previous month. Used car prices dropped 2.3% in April, though they’re still much more expensive than a year ago. The cost of clothing, appliances, and computers also declined.

And retailers like Target have reported rising stockpiles of televisions, patio furniture and other goods for the home as consumers have shifted their spending more toward travel and services-related goods like luggage and restaurant gift cards.

Those stores will likely have to offer discounts to clear inventory in the coming months. And auto manufacturers have been ramping up production as some supply chain snarls untangle and as they have managed to hire more workers. Both trends could keep reducing the cost of manufactured items.

Yet the cost of such services as restaurant meals, plane tickets and hotel rooms is still rising, offsetting much of the relief from cheaper goods. And the rising prices of gas and food, worsened by Russia’s invasion of Ukraine, will keep measures of inflation painfully high at least into the summer. The national average price of a gallon of gas has reached $4.60, according to AAA. A year ago, it was $3.04.

Chair Jerome Powell has pledged to keep ratcheting up the Fed’s key short-term interest rate until inflation is “coming down in a clear and convincing way.” Those rate hikes have spurred fears that the Fed, in its drive to slow borrowing and spending, may push the economy into a recession. That concern has caused sharp drops in stock prices in the past two months, though markets have rallied this week.

Powell has signaled that the Fed will likely raise its benchmark rate by a half-point in both June and July — twice the size of the usual rate increase.

Most economists have forecast that inflation, as measured by the Fed’s preferred gauge, will still be at about 4% or higher by the end of this year. Price increases at that level would likely mean that the Fed will still raise interest rates to lower inflation to its 2% target.

A better-known inflation gauge, the consumer price index, earlier this month also reported a slowing in price gains. The CPI jumped 8.3% in April from a year earlier, down from a 40-year high in March of 8.5%.

The inflation measure reported Friday, called the personal consumption expenditures price index, differs in several ways from the consumer price index that help explain why it shows a lower inflation level than the CPI does.

The PCE is a broader measure of inflation that includes payments made on behalf of consumers, such as medical services covered by insurance or government programs. The CPI covers only out-of-pocket costs, which in recent years have risen more. Rents, which are steadily rising, are also given less weight in the PCE than in the CPI.

The PCE price index also seeks to account for changes in how people shop when inflation jumps. As a result, it can capture, for example, when consumers switch from pricey national brands to cheaper store brands.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


A Boeing 737 Max suffered damage to parts of the plane's structure after it went into a “Dutch ro...

Associated Press

Plane that did ‘Dutch roll’ on flight from Phoenix suffered structural damage, investigators say

A Boeing 737 Max suffered damage to parts of the plane's structure after it went into a “Dutch roll” during a flight from Phoenix last month.

2 days ago

This photo provided by Randy Shannon shows Mooney Falls on the Havasupai reservation outside the vi...

Associated Press

Dozens report illness after trips to waterfalls near Grand Canyon

Dozens of hikers say they fell ill during trips to a popular Arizona tourist destination that features towering blue-green waterfalls deep in a gorge neighboring Grand Canyon National Park.

3 days ago

Mugshot of Rudy Giuliani, who was processed Monday, June 10, 2024, in the Arizona fake electors cas...

Associated Press

Rudy Giuliani posts $10K cash bond after being processed in Arizona fake electors case

Rudy Giuliani, a former New York City mayor and Donald Trump attorney, was processed Monday in the Arizona fake electors case.

6 days ago

FILE - White House former chief of staff Mark Meadows speaks with reporters at the White House, Wed...

Associated Press

Former Trump chief of staff Mark Meadows pleads not guilty in Arizona fake elector case

Former Donald Trump presidential chief of staff Mark Meadows and Trump 2020 Election Day operations director Michael Roman pleaded not guilty Friday in Phoenix to nine felony charges for their roles in an effort to overturn Trump's Arizona election loss to Joe Biden.

9 days ago

deadly heat wave last summer...

Associated Press

After a deadly heat wave last summer, metro Phoenix is changing tactics

Fresh memories of the deadly heat wave last summer have led Arizona authorities to launch new tactics ahead of summer 2024.

20 days ago

A Yuma man has been arrested for allegedly starting a wildfire in a national wildlife preserve near...

Associated Press

Man accused of starting wildfire in national wildlife preserve in Yuma

A Yuma man has been arrested for allegedly starting a wildfire in a national wildlife preserve near the California border.

21 days ago

Sponsored Articles



Desert Institute for Spine Care is the place for weekend warriors to fix their back pain

Spring has sprung and nothing is better than March in Arizona. The temperatures are perfect and with the beautiful weather, Arizona has become a hotbed for hikers, runners, golfers, pickleball players and all types of weekend warriors.


Midwestern University

Midwestern University Clinics: transforming health care in the valley

Midwestern University, long a fixture of comprehensive health care education in the West Valley, is also a recognized leader in community health care.


Collins Comfort Masters

Here’s 1 way to ensure your family is drinking safe water

Water is maybe one of the most important resources in our lives, and especially if you have kids, you want them to have access to safe water.

Key inflation gauge slowed to still-high 6.3% over past year