Inflation eases in April

May 15, 2024

The consumer price index (CPI) rose 0.3% in April, a touch lower than the consensus expectation of 0.4%. Higher energy prices and shelter costs fueled the rise in inflation. Gasoline prices increased 2.8% after rising by 1.7% in March. There was a slight moderation in housing costs, 0.2% versus 0.4% in the prior month, although with an asterisk. Shelter costs rose 0.4%, the same as in recent months, still not showing the cooling. Instead, a 0.3% drop in fuel and utility costs for housing contributed to the moderation in overall housing costs. Food prices were unchanged, essentially flat over the past three months. The CPI index rose 3.4% from a year ago in April, down from 3.5% in March.

The core CPI, which excludes food and energy, rose 0.3%, right in line with market expectations. Core CPI rose 3.6% from a year ago in April, a step down from 3.8% in March. Big-ticket item prices continue to fall and have entered deflationary territory. Prices for new vehicles, appliances and furniture all declined. Goods prices fell 0.1% in April; they are down 1.3% from a year ago. The annual decline in goods prices is the largest drop in 20 years, since April 2004. 

The supercore services measure, which excludes shelter and energy costs, rose 0.4% in April after rising 0.7% in March. The three-month annualized measure decelerated to 6.3% from 8.2%. Despite the easing in both measures, inflation is still running too hot. On an annualized basis, the supercore measure picked up to 4.9% from 4.8%. 

Medical services and insurance costs firmed again in April. Hospital costs rose 0.6% and motor vehicle insurance rose 1.8%. Over the last 12 months, motor vehicle insurance is up 22.6%. 

Consumers continue to travel. TSA throughput remains at elevated levels as vacationers are enticed by travel deals. Airline fares declined 0.8% while hotel costs fell 0.3%. 

Several of the pass-through components in CPI and the prior day's hotter-than-expected PPI release that feed into the personal consumption expenditures (PCE) index imply that the PCE measure will show less progress when it is reported later this month.