Prices Continued to Rise in April, but Gains Slowed a Little: Live Updates (original) (raw)
Gasoline prices fell in April, making overall inflation look tamer.
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A Mobil gas station in Manhattan.Credit...Gabby Jones for The New York Times
A decline in gasoline prices was responsible for the slight moderation in overall inflation during April. But that might not bring much solace to American households, whose budgets have been strained by the fuel cost spikes of the past year.
Energy prices fell 2.7 percent in April, driven by a decrease in the cost of gasoline, which fell 6.1 percent from March. But overall energy prices were still 30.3 percent higher than a year earlier, more than three times the rate of both overall inflation and so-called core inflation.
Energy and food are not included in the core inflation measure because the volatility of those markets could wildly skew the overall data in a given month.
For much of the spring, gasoline prices climbed sharply, largely as a reaction to the expected supply shock caused by the Russian invasion of Ukraine and resulting sanctions on Russia. But the price of crude oil has fluctuated in recent days, leaving the path of fuel costs for consumers uncertain in the coming weeks and months.
“The inflation data’s lag has us already discounting some of what fell in the report,” said Steve Wyett, chief investment strategist at BOK Financial, a regional bank based in Oklahoma with a high concentration of clients in energy production. “But overall the numbers feel a bit hotter than what is comfortable.”
The average price for a gallon of regular gasoline reached $4.40, a record, on Wednesday.
The price of diesel — currently $5.55 per gallon, according to AAA — has been rising faster than gasoline, which has driven up cost pressures in transportation, agriculture, shipping and travel. Natural gas prices have also spiked since the start of the year, which pushes up home utility bills.
West Texas crude fell below 100onTuesday,adeclineofroughly10percentsincetheweekend,butendedWednesdayat100 on Tuesday, a decline of roughly 10 percent since the weekend, but ended Wednesday at 100onTuesday,adeclineofroughly10percentsincetheweekend,butendedWednesdayat105.71. Many energy analysts think consumers will see some relief as the summer driving season starts, with gasoline prices leveling off somewhat, even if at uncomfortably high levels.
Food prices rose again in April, with increases in the cost of eggs, cereal and other products.
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On an annual basis, food prices in April were up 9.4 percent from one year earlier.Credit...OK McCausland for The New York Times
Prices of dairy, eggs and cereals soared in April, pushing up overall inflation as an outbreak of bird flu, the rising cost of fuel and fertilizer, labor shortages and other factors added to prices at restaurants and grocery stores.
The price of food rose 0.9 percent in April from the previous month, the 17th consecutive monthly increase, according to the Consumer Price Index compiled by the Bureau of Labor Statistics and released on Wednesday.
The increase was driven by a 2.5 percent increase in the price of dairy, a 2.0 percent increase in nonalcoholic beverages and a 10.3 percent increase in the cost of eggs, as avian flu decimated poultry flocks.
But prices of fruits and vegetables declined from the previous month, and the overall pace of rising prices for groceries cooled slightly in April, rising 1.0 percent after an increase of 1.5 percent the previous month.
On an annual basis, the food index was up 9.4 percent from one year earlier. An index for meats, poultry, fish and eggs rose 14.3 percent from the previous year, the largest annual increase since 1979.
In the United States, rising prices have particularly affected poorer households, which spend more of their income on food. And shortages of formula, stemming from a nationwide recall and supply chain challenges, have left some parents desperate to feed their babies.
Droughts in some parts of the world have reduced crops, while the war between Russia and Ukraine, two significant food producers, has led to spiraling prices for wheat, sunflower oil and other products. Rising prices are weighing heavily on food-importing countries in eastern Africa and the Middle East.
Ariane Curtis, a global economist at Capital Economics, said in a note Wednesday that the rise in agricultural commodity prices stemming from the war in Ukraine had added 0.6 percentage points to average inflation in advanced economies, but that the effect would fade in the months ahead as price increases cooled.
A statistical quirk — known as a “base effect” — will start to affect the rate of inflation for food in the coming months. Agricultural prices started to skyrocket in the second half of last year, meaning year-over-year price increases will start to look less steep since they are measured from a higher starting point. Still, pricier food will weigh on consumer spending growth in developed markets, Ms. Curtis wrote.
Amid rising prices and food shortages, dozens of countries have banned exports of certain food products in the past two months, measures that aim to ensure adequate supplies for their citizens but that can exacerbate shortages worldwide.
“If we break down global supply chains for food and agriculture, the food crisis will only become worse,” David W. MacLennan, the chief executive of Cargill, said at a conference hosted by the U.S. Chamber of Commerce on Tuesday. “The worst thing we can do is close down trade as it relates to food.”
On Wednesday morning, the White House announced that it was taking several steps to encourage more production from American farmers, including offering more insurance to farmers who plant a second crop on their land during a year, helping them gain access to technology that helps them reduce the use of fertilizer and other inputs, and doubling federal investments in domestic fertilizer production.
Later Wednesday, President Biden and Tom Vilsack, the secretary of agriculture, visited a farm in Illinois, where the president spoke about how the Russian invasion of Ukraine is raising food prices and how U.S. farmers can help alleviate global food shortages, in part by doubling up on crops.
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Biden visits an Illinois farm to talk about boosting U.S. food production as costs rise.
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“We have to keep investing in our farmers to reduce the costs, reduce prices to consumers and have the most productive, most efficient farmers in the world here in the United States,” President Biden said during a visit to a farm in Kankakee, Ill., on Wednesday.Credit...Doug Mills/The New York Times
President Biden on Wednesday called farmers “the backbone of freedom” and said they were helping to feed the world even as Russia’s invasion of Ukraine disrupts global supplies of grain and other essential crops.
“You got us through a pandemic and you’re literally the backbone of our country,” Mr. Biden said, speaking after touring a farm in Illinois. “That’s not hyperbole. But you’re also feeding the world. And we’re seeing with Putin’s war in Ukraine, you’re like the backbone of freedom.”
Mr. Biden offered his praise for America’s food producers on a day when data showed inflation was still high in the United States. Flanked by Tom Vilsack, the secretary of agriculture, the president announced several steps he said would help keep food prices lower.
Among other things, the administration will offer more insurance to farmers who plant a second crop on their land during a year, help farmers gain access to technology that helps them reduce the use of fertilizer and other inputs, and double federal investments in domestic fertilizer production.
“We have to keep investing in our farmers to reduce the costs, reduce prices to consumers and have the most productive, most efficient farmers in the world here in the United States,” Mr. Biden said.
Food prices have skyrocketed globally, the result of supply chain disruptions, severe weather, energy costs and Russia’s invasion of Ukraine. Russia, Belarus and Ukraine are critical producers of fertilizer, wheat, corn and other commodities, and many of those products have been trapped as a result of the invasion. At the same time, more than 40 countries have begun restricting exports of grains, oils and other key products as governments look to protect their own stockpiles amid rising costs and shortages.
During a congressional hearing on Tuesday, Treasury Secretary Janet L. Yellen said the United States was “terribly concerned about global food supplies,” adding that 275 million people globally face starvation.
Food prices in the United States are also increasing. The price of food rose 0.9 percent in April from the previous month, according to data released on Wednesday.
The increase was driven by a 2.5 percent increase in the price of dairy, a 2 percent increase in nonalcoholic beverages and a 10.3 percent increase in the cost of eggs, as avian flu decimated poultry flocks.
It remains to be seen whether the United States can really boost production in a meaningful way. But the visit to a farm in Kankakee, Ill., comes as Mr. Biden, under pressure over the fastest pace of inflation in 40 years, tries to reassure Americans that his administration is taking price increases seriously.
On Tuesday, Mr. Biden said in a speech at the White House that inflation was his “top domestic priority” and that his administration was taking whatever steps it could to try to reduce costs. He reiterated that commitment on Wednesday after the latest inflation data showed prices rose by 8.3 percent in April, down slightly from March but still uncomfortably high for many families.
“While it is heartening to see that annual inflation moderated in April, the fact remains that inflation is unacceptably high,” he said in a statement. “As I said yesterday, inflation is a challenge for families across the country and bringing it down is my top economic priority.”
With the midterm elections approaching and Republicans continuing to blame the president and Democrats for rising inflation, Mr. Biden has been trying to convince Americans that they would be better off sticking with his party if they want to see costs go down.
“Congressional Republicans talk about inflation, but their only plan is to raise taxes on working families, taking even more money out of their pockets,” Mr. Biden said on Wednesday.
Republicans wasted little time blasting Mr. Biden about the latest inflation data, saying that his administration’s policies were stoking the run-up in prices.
“Today’s data on consumer price inflation shows the Biden administration’s runaway inflation is not contained and a slight, one-month dip downward is no cause for celebration, as Americans continue to feel the pain of broad-based and rapid price increases,” Senator Mike Crapo, an Idaho Republican, said in a statement.
Americans differ on what’s to blame for inflation.
Americans are nearly unanimous in their worry about inflation. There is much less agreement about what is to blame for the problem.
More than nine in 10 adults say they are at least “somewhat concerned” about inflation, and more than six in 10 say they are “very concerned,” according to a survey conducted last month for The New York Times by the online research firm Momentive. The findings echo those in other recent surveys, including one from Gallup last month in which a record share of Americans listed inflation as their top financial problem.
The fastest inflation in decades is taking a toll on Americans’ economic outlook. Forty-one percent of respondents in the Momentive survey said they were worse off financially than a year ago, the highest share in the more than five years that the company has been asking the question.
Republican elected officials and candidates have sought to blame President Biden and congressional Democrats for the problem, while Democrats have pointed the finger at forces largely outside their control. The Momentive survey suggests that neither party’s message has fully convinced voters.
Republicans, for example, have argued that the American Rescue Plan, the $1.9 trillion pandemic relief package that Democrats passed early last year, led the economy to overheat, contributing to inflation. But 67 percent of respondents in the survey — including 42 percent of Republicans — said they approved of the law, the same level of support as when it passed last year. Only 30 percent said the law deserved “a lot” of blame for inflation.
On the other hand, only 30 percent of respondents said the war in Ukraine deserved a lot of blame for inflation. White House officials in recent weeks have repeatedly referred to “Putin’s price hike,” a reference to the role that Russia’s invasion of Ukraine has played in driving up oil and gas prices.
“That messaging really hasn’t broken through,” said Laura Wronski, director of research for Momentive.
Respondents, who could choose more than one answer, were more likely to say they blamed supply-chain problems (43 percent) or the pandemic in general (45 percent) for inflation. About 40 percent also said they blamed corporations, an argument that has been popular among progressives but that the White House has been reluctant to embrace fully.
“Everyone can kind of look at the same set of issues that are going on and see it through their own specific lens,” Ms. Wronski said.
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In Germany, rising food prices drive inflation to a second consecutive record.
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A supermarket in Düsseldorf, Germany. Rising prices for food pushed inflation higher in April, Germany’s statistics office said.Credit...Ina Fassbender/Agence France-Presse — Getty Images
Inflation in Germany reached a high for the second consecutive month in April as consumers paid more for food and energy, and the head of the Bundesbank said the economy should prepare for rising interest rates.
Consumer prices in Germany, Europe’s largest economy, rose at an annual rate of 7.8 percent in April, the Federal Statistics Office said Wednesday, citing preliminary figures that are adjusted to make them comparable with inflation data from other European Union countries. The office said the inflation rate was the highest since German reunification in 1990.
April was the second straight month that the rate remained above 7 percent, after consumer prices jumped 7.6 percent in March compared with 2021, largely driven by energy. For April, the statistics office pointed to a sharp increase in the price of food as the main driver for higher prices.
“This is where the impact of the war in Ukraine is becoming more and more visible,” the office said in a statement.
The price of a liter of milk has increased more than 11 percent since the start of the year, while a kilogram of flour has jumped about 40 percent, according to a survey commissioned for Germany’s financial daily newspaper, Handelsblatt. Many Germans have been panic-buying and hoarding staples, especially flour and oil, out of fears of shortages caused by the war in Ukraine.
The president of Germany’s central bank, the Bundesbank, Joachim Nagel, warned in a speech that the country could face a prolonged period of higher prices. “Governments and financial markets alike have to prepare for rising interest rates,” Mr. Nagel said during a conference hosted by DZ Bank on Wednesday,
He has urged the European Central Bank to take more aggressive action to counter the price spiral, pointing to the fact that even before Russia invaded Ukraine on Feb. 24 consumer prices were running high in part because of restrictions imposed on economies around the world to stem the spread of the coronavirus.
Across Europe, inflation has hit a record high for six months in a row, and the European Union’s statistics office, Eurostat, forecast a 7.5 percent rise for April. Uncertainty surrounding Russian energy supplies to Europe has economists warning that an embargo on fossil gas could send the European Union into a recession.
The German government is trying to counteract the spiraling price of energy by cutting taxes on gasoline and offering a monthly public transit pass for less than $10 from June through August. But economists at Berenberg Bank predicted inflation would remain high throughout the summer, affecting businesses first and then consumers.
“Supply-chain shortages and higher energy costs for producers will hit consumers only with a lag,” Holger Schmieding, Berenberg’s chief economist, said. He, too, called on the European Central Bank to take action.
Christine Lagarde, the central bank’s president, signaled in a speech on Wednesday that the bank would be ready to raise its interest rates before the summer was over.
After a decade of sustained disinflation, the recovery from the coronavirus pandemic, followed by Russia’s invasion of Ukraine, “has exacerbated all the main drivers of inflation, while also — as a classic supply shock — increasing economic uncertainty and clouding the growth outlook,” Ms. Lagarde said.
“This has even further complicated the situation facing monetary policy since, in the near term, inflation and growth are moving in opposite directions,” she said. The bank plans to respond by ending its pandemic-era stimulus by the end of July, and could then raise interest rates “sometime after the end” of the stimulus, she said.
Stocks fall as investors weigh a mixed inflation report.
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Stocks on Wall Street were turbulent on Wednesday, after the latest data on U.S. consumer prices showed inflation remains uncomfortably high, with some key measures rising faster in April than the month before.
The S&P 500 dropped 1.6 percent, after swinging between gains and losses in the morning. The yield on 10-year Treasury notes was down about 0.08 percentage points, to about 2.92 percent.
The Consumer Price Index rose 8.3 percent in the year through April, a slight deceleration from March, when prices rose 8.5 percent, but still a bigger jump than economists had expected. The government’s report also showed core inflation — which strips out volatile food and gas prices — rose 0.6 percent in April from the previous month, faster than its 0.3 percent increase in March.
It comes in a turbulent year for the stock market, which is experiencing head-spining volatility. The S&P 500 — which has registered five consecutive weekly declines and is on track for a sixth — is down more than 18 percent as of Wednesday’s market close from its record high in January, and it is not far from a bear market, which happens when a stock’s decline from its most recent peak hits 20 percent.
The Nasdaq composite, which is heavily weighted toward technology stocks, has been in bear market territory for months. It was down 29.2 percent from its peak after dropping 3.2 percent on Wednesday.
The price report also showed that energy prices, a major worry for American households, fell 2.7 percent in April, driven by a decrease in the cost of gasoline, which fell 6.1 percent from March. But energy prices were still outpacing overall inflation.
The slight deceleration in overall consumer prices on an annual basis is also in part because the data is being compared to last spring’s numbers, when prices started to climb rapidly, and economists are still worried the invasion of Ukraine, which has caused energy prices to surge, and Covid-19 lockdowns in China could further exacerbate price gains.
Wall Street’s key concern this year is whether the Federal Reserve will have to raise interest rates so quickly — as it tries to get inflation under control — that it pushes the economy into a recession. With that in mind the data was a “disappointment,” said Craig Erlam, senior market analyst at the currency exchange Oanda.
“There’s major concern about how aggressive the Fed is going to have to be, and whether the markets are even positioned well,” he said.
European stock indexes were higher, with the Stoxx Europe 600 gaining 1.7 percent. In Asia, stocks ended the day mixed.
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Strategies
3 things that can help investors cope with inflation.
As the latest monthly numbers show, inflation is too high to ignore. The price of nearly everything — gasoline, bread, meat, hotel rooms, streaming services — has been rising.
The Federal Reserve recognizes that. It is raising short-term interest rates and reducing its bond holdings in an effort to bring inflation down.
But in the process, the Fed has disrupted financial markets and contributed to big price reductions for stocks and bonds. Over the short term, the effort to curb inflation has increased the pain that ordinary people feel from inflation itself.
For months now I’ve been writing about the causes of inflation, the problems it is creating and what investors can do about all of them. You can find some of those discussions here, here and here. And here are some quick tips.
Check out I bonds.
If your main concern is protecting your cash in the safest way possible, consider I bonds. These U.S. government bonds are paying an astonishing yield: 9.62 percent, as my colleague Ann Carrns reported. The interest rate resets every six months and is linked to the rate of inflation. Buy them directly from the Treasury.
Stocks can be a good inflation hedge.
The stock market is a risky place to keep your money, but it’s been a good bet over the long term. As John C. Bogle, the founder of Vanguard, told me during another crisis in the stock market more than a decade ago, the long run is a decade, at a bare minimum, but preferably 20 years or more.
As I’ve written, if you can, it is best to think today about getting a good return on your money through 2032 or, ideally, much longer, and to invest in the total market through low-cost index funds. Over long periods, stocks have beat inflation and most other asset classes.
For long-term investors, simply because stock prices are so much lower now, it is already a better time to buy than it was in early January, when the S&P 500 was at a peak.
It might be a good time to invest in high-quality bonds.
This also has been a terrible stretch for the bond market. Yet, as I wrote recently, that’s also precisely why this is a better time to invest in bonds than it was just a few months ago.
Bond prices and yields (or interest rates) move in opposite directions. As yields have risen, prices have fallen, driving down the value of bonds. That trend could continue, so trading in bonds could be risky. (If you own a government bond to maturity, the principal is guaranteed, so you won’t lose money and there’s no need to worry about that.)
There’s a silver lining if you’re thinking of buying bonds or bond mutual funds for the long haul, though. You will receive much more in interest payments now than you did last year.
Questions
Do you have any questions that our columnist hasn’t yet answered? Ask them here.
Consumers focus on particular prices in forming inflation expectations.
While professional forecasters are preoccupied with the full spectrum of prices driving inflation, consumers focus more narrowly on a few items when forming expectations about where prices are likely to go, according to a study published by the Federal Reserve Bank of Cleveland.
In particular, consumers weigh the price of food away from home — that is, eating out — far more heavily than other spending categories, like medical services, that drive the overall inflation rate. The costs of auto maintenance and new vehicles also factor prominently into peoples understanding of inflation’s trajectory, especially in more car-dependent regions like the South and the upper Midwest.
That matters because consumers adjust their spending and demand pay increases in proportion to how much they think essential items will cost in the near future, the study’s three authors say. Policymakers have been struggling to avoid a “wage-price spiral,” in which price and wage increases become self-reinforcing and escalate out of control.
The different weights consumers place on various spending categories may affect future inflation in ways that aren’t fully captured by topline expectations, the economists wrote in a commentary published by the Cleveland Fed last month. “Communicating with the public about why prices are changing in certain key sectors may help avoid any long-lasting changes in consumers’ inflation expectations,” they said.
The Federal Reserve pays most attention to a measure of inflation that excludes food and energy prices because of their volatility. This study suggests, however, that high-frequency spending categories like food tend to motivate consumer psychology more than changes in the cost of rent, for example, which most people encounter only once a year.
The researchers used a combination of the Survey of Professional Forecasters, the University of Michigan’s survey of consumer expectations, and the Bureau of Labor Statistics’ Consumer Price Index to correlate which items each group seems to consider most important in thinking about future prices.
— Lydia DePillis
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States want to cut taxes to offset inflation, but it could make the problem worse.
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Economists warn that cutting taxes could worsen the problem of high prices, amplifying inflation by stimulating consumer spending.Credit...OK McCausland for The New York Times
A combination of flush state budget coffers and rapid inflation has lawmakers across the country looking for ways to ease the pain of rising prices, with nearly three dozen states enacting or considering some form of tax relief, Alan Rappeport reports for The New York Times.
The efforts are blurring typical party lines when it comes to tax policy. In many cases, Democrats are joining Republicans in supporting permanently lower taxes or temporary cuts, including for high earners.
But while the policies are aimed at helping Americans weather the fastest pace of inflation in 40 years, economists warn that, paradoxically, cutting taxes could exacerbate the very problem lawmakers are trying to address. By putting more money in peoples’ pockets, policymakers risk further stimulating already rampant consumer demand, pushing prices higher nationally.
The fresh appetite for tax cuts comes at a time when states are awash in cash following a faster-than-expected economic rebound in 2021 and a $350 billion infusion of stimulus funds that Congress allocated to states and cities last year. While the Biden administration has restricted states from using relief money to directly subsidize tax cuts, many governments have been able to find budgetary workarounds to do just that without violating the rules.