The Consumer Price Index (CPI) rose 0.4 percent in April on a seasonally adjusted basis, down from 0.5 percent in March. The gain, which was in line with most analysts’ expectations, was led mostly by food and energy costs, which remained elevated but below their increases from the past two months.
Food prices rose 0.4 percent, with the cost of many grocery items up significantly over the past year. The largest increases in food items over the past year, for instance, were for fats and oils (up 8.1 percent), meats, poultry, fish, and eggs (up 7.6 percent), dairy and related products (6.3 percent), and fruits and vegetables (up 2.6 percent).
Gasoline prices rose 7.5 percent in April, or 33.1 percent over the last year. Likewise, household energy costs were also higher, up 0.3 for the month or 1.9 percent year-over-year. For those homes using fuel oil, the price increases were greater, however (2.0 percent and 25.4 percent, respectively). Excluding food and energy costs, the CPI rose a more modest 0.2 percent.
Higher costs for food and energy are beginning to chip away at over consumer spending. Yesterday, for instance, the Census Bureau released new data on retail sales. Retail sales slowed somewhat in April, up 0.5 percent for the month versus 0.9 percent in March. The effect of rising gasoline prices is having an impact, as gasoline stations experienced a 2.7 percent increase in sales for the month, the largest of any retailer. Core sales, which exclude autos and gasoline, were only up 0.2 percent. The biggest declines in sales were in electronics and appliances (down 2.2 percent), sporting goods and hobbies (down 1.9 percent), and furniture and home furnishings (down 1.1 percent).
Despite this, the Reuters/University of Michigan Consumer Sentiment Index rose in May to 72.4, up from 69.8 in April. This gain was unexpected, as most analysts had suspected that rising energy costs would dampen consumer enthusiasm. Consumers were more optimistic about the longer term outlook, which helped drive up the numbers. With this increase, consumer confidence has risen for the past two months. Keeping this number in perspective, though, consumers are still anxious overall, with the index still not recovering from its ten-point loss between February and March from 77.5 to 67.5.
Chad Moutray is chief economist, National Association of Manufacturers.