Higher gas prices drive energy costs up 2.2%; core CPI climbs 0.2%
By Jeffry Bartash, MarketWatch
WASHINGTON (MarketWatch) — The prices that American consumers paid for goods and services rose 0.4% in April, with higher gasoline costs accounting for more than half the increase, the government reported Friday.
Economists surveyed by MarketWatch had expected the consumer-price index, which tracks inflation at the retail level, to increase 0.4% in April.
Consumer prices have jumped an unadjusted 3.2% over the past year, the largest 12-month increase since October 2008. As recently as November, the 12-month increase was 1.1%.
Surging oil prices accounted for the bulk of the CPI increase, as the energy index jumped 2.2% last month. Energy prices have leaped 19% — and gas has surged 33% — over the past 12 months. As a result, the cost of gas now tops $4 a gallon in many parts of the U.S.
Food prices rose 0.4% last month, but that was smaller than March’s 0.8% increase. The slower increase in food costs stemmed from declining prices of fresh vegetables.
Still, food costs have climbed 3.2% over the past 12 months.
The government’s “food at home” index, which excludes takeout orders and restaurant purchases, increased 0.5% in April, and it has risen 3.9% over the past 12 months.
Stripping out food and energy, the so-called core rate of consumer-price inflation rose 0.2% — matching the MarketWatch forecast. Wall Street and the Federal Reserve pay more attention to the core rate because it usually gives a better idea of underlying inflationary trends.
Yet investors and central bankers cannot ignore food and energy prices if they continue to rise. Higher inflation can outstrip wage increases, leaving consumers worse off. Average hourly earnings of U.S. workers fell 0.3% last month after adjusting for inflation, the Labor Department also reported Friday.
Inflation-adjusted hourly wages are down 1.2% over the past 12 months.
Higher prices can also hurt the rest of the economy. When consumers have to spend more cash on basic necessities, it usually translates into weaker demand for other goods and services. The result could be slower growth.
One potentially positive sign for consumers is a recent drop in oil prices. The cost of light crude fell below $100 a barrel this week after recently nearing $115. Oil prices would have to continue to drop to offer consumers much relief, however.
What’s more, the costs of many valuable commodities ranging from metals to major crops have also soared in recent months. That has put pressure on producers of a wide variety of consumer goods and services to raise prices.
