The inflation rate went down a click in April, ending two straight months of inflation gains. The April Consumer Price Index (CPI) reported the 12-month inflation rate at 3.4% for April, down barely from 3.5% in March. Nevertheless, the inflation rate remains to be higher than it was in February, when it was 3.2%.
On a seasonally adjusted, month-over-month basis, inflation rose 0.3% in April, barely lower than the 0.4% growth rate in March. Economists had anticipated a rise of 0.4% in April, so it was down barely from expectations.
In consequence, the stock markets opened higher on Wednesday, with all of the key indexes up.
Core inflation rate hits three-year low
Core inflation, which excludes the more volatile food and energy costs, was at 3.6% in April, down from 3.8% in March. Last month’s core inflation rate is the bottom since April 2021.
The indexes for shelter, motorized vehicle insurance, medical care, apparel and private care all increased in April. The indexes for used cars and trucks, household furnishings and operations, and latest vehicles all decreased over the month.
Gasoline prices jumped 2.8% in April but are only up 1.2% over the past 12 months. Shelter costs increased 0.4% in April, with the 12-month inflation rate at 5.5%.
“The index for shelter rose in April, as did the index for gasoline. Combined, these two indexes contributed over 70% of the monthly increase within the index for all items,” the CPI press release stated. “The energy index rose 1.1% over the month. The food index was unchanged in April. The food-at-home index declined 0.2 percent, while the food away from home index rose 0.3% over the month.”
During the last 12 months, food prices have risen 2.2% while energy costs at the moment are 3.1% higher. Electricity costs are up 5.1% while transportation-services costs have gained 11.2%. However, prices for utility gas service is down 1.9% while used automotive and truck prices are 6.9% lower from a 12 months ago.
The lower CPI numbers come at some point after it was revealed that the Producer Price Index had risen barely in April.
Equity markets move higher
All of the key stock indexes were up on the decent inflation report on Wednesday. The largest mover shortly after the markets opened was the Russell 2000, which was up 1.1% on the day. The S&P 500 and Nasdaq Composite were each up 0.6%, while the Dow Jones Industrial Average gained 196 points, or 0.5%, shortly after the opening bell.
While inflation rates remain above where they were in February, the downward movement is a positive sign, because the Federal Reserve is in search of inflation to maneuver consistently lower toward its goal rate of two% annually. If or when it occurs, that drop might be the central bank’s cue to think about lowering rates of interest.
The subsequent economic-data release to keep watch over is the Personal Consumption Expenditures (PCE) Index, which is due for release on May 31. The PCE Index is the Fed’s preferred inflation gauge; in March, it rose 2.8% 12 months over 12 months.