Consumer prices declined for the second straight month, according to the Bureau of Labor Statistics. The consumer price index (CPI) was down 0.4 percent in April, building on the 0.2 percent decrease in March. These declines have helped to decelerate the year-over-year pace in inflation, falling from 2.0 percent in February to 1.5 percent in March to 1.1 percent in April. This suggests that Americans have generally benefited from mild inflationary pressures, with lower energy costs helping to provide a buffer for other increases.
Indeed, the decrease in the price of gasoline was the main contributor to reduction in the CPI in both March and April, with gasoline costs down 4.4 percent and 8.1 percent in those two months, respectively. On a year-over-year basis, gasoline costs were off 8.3 percent. These declines more than offset increases in electricity and natural gas.
Food prices were up a very modest 0.2 percent, with the largest increases in cereals and baking products (up 0.6 percent) and meats, poultry, fish and eggs (up 0.4 percent). The cost of fruits and vegetables declined 1.4 percent, offsetting some past increases. Overall food costs continue to experience moderate gains, up 1.5 percent on annual basis. This represents a slight pullback from the 1.8 percent pace of December.
Core inflation, which excludes food and energy costs, remains in the acceptable range. The year-over-year pace is currently 1.7 percent, down from 1.9 percent in March and 2.0 percent in February. This is below the stated goal of the Federal Reserve Board of 2.0 percent, enabling the Federal Open Market Committee to continue to pursue expansionary policies. As such, it also mirrors the producer price index data released yesterday. Both consumers and manufacturers continue to benefit from the slower pace of growth in prices, with inflationary pressures in-check, at least for now.
Chad Moutray is chief economist, National Association of Manufacturers.