Inflation pressures in America remained muted last month, according to new data from the Bureau of Labor Statistics. For example, the producer price index (PPI) for final demand, a key gauge of wholesale cost changes, rose at an annual rate of 2.2 percent in April, unchanged from March and below forecasts. After stripping out the volatile food and energy components, “core” PPI increased by 2.4 percent during the past twelve months, below expectations and matching the slowest rate of annual growth recorded in roughly a year. Price increases are still occurring, though, and some of the noteworthy gains in April were seen in the costs of healthcare and portfolio management services. The latter is likely a side-effect of the sharp rebound in the stock market seen during the first four months of 2019.
Tariffs have raised input prices as well for some firms, but many businesses for now have opted to absorb these extra costs in the hope that it will only be a temporary setback if the trade war is resolved quickly. Recent tax cuts and related productivity gains have also helped some companies prevent any uptick in inflation from filtering through to their customers. Moreover, another new report from the BLS showed that the consumer price index (CPI) for all urban consumers, a popular metric of household inflation in America, increased at an annual rate of 2.0 percent in April, softer than expected, and core CPI lifted by 2.1 percent, in line with estimates. Although a gradual pickup in consumer price pressures may occur later this year as the labor market continues to tighten, the current muted inflation environment has helped many Americans enjoy the best real wage growth in years. This will be critical for sustaining consumer spending in the future.
Sources: Econoday, U.S. DoL, Twitter, FRBSL
Post author: Charles Couch