Inflationary pressures ease, as producer prices drop 0.3%
On a month-to-month basis, overall producer prices have now dropped three of the last four months.
On a month-to-month basis, overall producer prices have now dropped three of the last four months.
Housing costs continue to be a major driver of overall inflation. Rent rose 0.5 percent in May over the month before, only a minor improvement from a 0.6 percent increase in April. Rental costs are still up 8.7 percent over last year.
An emerging pullback should be welcome news for the Federal Reserve, which has been taking aggressive steps for more than a year to slow the economy enough to bring down inflation.
Leading Federal Reserve officials are sending out stronger signals that they will forego an increase at the central bank’s next meeting, though they indicate hikes could resume later this year.
The resilience of the American labor market continues to complicate the Federal Reserve’s efforts to fight inflation.
Consumer confidence fell in May as Americans became more pessimistic about the labor market, on top of elevated anxiety over inflation.
Friday’s report from the government showed that despite rising prices, consumers remain willing to spend.
The stubbornness of high inflation is dividing the Federal Reserve over how to manage interest rates, leaving the outlook for the Fed’s policies cloudier than at any time since it unleashed a streak of 10 straight rate hikes.
Applications for unemployment benefits climbed to a more than one-year high and wholesale inflation continued to moderate, adding to signs of softening in the economy.
The nation’s inflation rate has steadily cooled since peaking at 9.1% last June but remains far above the Federal Reserve’s 2% target rate.
The average price of a new vehicle in the United States has risen 30 percent over the past three years, according to Kelley Blue Book, pricing more Americans out of the new car market.
April’s hiring gain compares with 165,000 in March and 248,000 in February and is still at a level considered vigorous by historical standards.
Quarterly productivity figures are extremely volatile, but if the latest decline is sustained, it risks keeping inflationary pressures elevated.
Another quarter-point rate increase on Wednesday would leave the Fed’s key rate at 5.1%—a 16-year high and a full 5 percentage points higher than in March 2022.
Key measures of prices and wages remained high in March, keeping the Federal Reserve on track to raise interest rates next week for the 10th time since March of last year in its drive to defeat high inflation.
Banks were initially slow to raise their payouts as the Fed raised rates because they were awash in deposits. But those deposits have shrunk over the past year because inflation forced consumers and businesses to dip into their savings.
Firms saw new orders jump to the highest rate in 11 months, especially in the service sector. That allowed businesses to pass on higher costs to customers, resulting in the fastest jump in output prices in seven months.
Reading the inflation report, economists emphasized the need to stay cautious and not treat all sources of price hikes as equal.
Despite last month’s decline, food costs are still up more than 8% in the past year. And restaurant prices, up 0.6% from February to March, have risen nearly 9% from a year ago.
Companies from toothpaste makers to Chipolte are adding more premium items as they reach out to wealthier shoppers who are still spending freely even in the face of higher inflation.