US inflation slowed in April after seven months of steady gains, according to new Labor Department figures.
Consumer prices were up 8.3% last month compared to 12 months earlier – below the 8.5% year-on-year surge seen in March, which was the highest rate since 1981.
Despite April’s figure being the first deceleration since August last year, it was the seventh consecutive month of year-on-year increases over 6%.
The consumer price index was up 0.3% last month – the smallest gain since August, and smaller than the 1.2% rise seen in March. The April figure was also above economists’ forecast of a 0.2% rise.
But analysts say that the reprieve is likely to be temporary, with the prices of fuel, food, and global goods climbing again.
Strain on global supply chains, exacerbated by China’s zero-COVID lockdowns, will also see prices go up, while the costs of air travel, hotel accommodation, and new cars are also likely to keep inflation high.
The core CPI (CPI excluding food and energy), rose 0.6% after a 0.3% rise in March, and 6.2% when compared to April last year.
US President Joe Biden has this week acknowledged the pain that high inflation is causing for Americans, promising that bringing prices down is his “top priority”.
Last week the Federal Reserve raised its policy interest rate by half a percentage point – the biggest rise in 22 years – in an effort to exert some control over inflation.
Neil Wilson, chief market analyst for Markets.com, described the US CPI as “broadening and not peaking”, adding that “there are signs that there are more areas contributing to the (month-on-month) rise…which is bad for taming inflation”.
As for what the figures mean for the Federal Reserve, he said: “I don’t think one hot CPI print makes a summer…but the core reading has spooked lots of folks who had got the wrong side of this and had tried to second-guess a softer reading than we got. Less peaking and more plateauing…higher for longer.”
Rochelle Vaz, associate at Global Capital Markets at Validus Risk Management, said: “While CPI seems to have peaked in March largely due to a softening in oil prices, inflation is still uncomfortably high and high inflation expectations are firmly embedded.
“This does not bode well for macro as the Fed will be forced to capitulate to raising policy rate by more than 50 bps (basis points) if the trend continues. The market will be keenly watching the May CPI print to assess how the Fed would react at its June meeting.”
Wall Street’s main indexes opened lower following the inflation figures – the Dow Jones Industrial Average fell 0.12%, the S&P 500 opened lower by 0.27%, while the Nasdaq Composite dropped 0.78%.
However, The Dow and S&P later surged upwards as investors focused on the month-on-month CPI figure easing.
The FTSE 100 in London lost much of its gains for the day when the data dropped but it, too, forged a recovery to be 1.25% up on the day – propped up, initially, by a further weakening of the pound as the dollar gained traction again.