U.S. consumer-price gains miss estimates, testing Powell’s view

THE UNITED STATES consumer-price index increased 0.3% monthly and 2% annually in April. / BLOOMBERG FILE PHOTO/VICTOR J. BLUE
THE UNITED STATES consumer-price index increased 0.3% monthly and 2% annually in April. / BLOOMBERG FILE PHOTO/VICTOR J. BLUE

NEW YORK – A key measure of United States consumer prices rose by less than expected in April on lower used-car and apparel costs, testing the Federal Reserve’s message that muted inflation will prove transitory.

The core consumer price index, which excludes food and energy, rose 0.1% from the prior month, missing estimates, and 2.1% from a year earlier as forecast, according to a Labor Department report Friday. The broader CPI rose 0.3% monthly and 2% annually, with both figures less than projected.

The data suggest a sustained pickup in inflation may remain elusive for some time despite the lowest jobless rate in 49 years and consistent wage gains. However, prices could get a boost in coming months after President Donald Trump increased tariffs on Chinese imports Friday.

The three-month annualized change in the core gauge was 1.6%, the lowest in almost two years.

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Energy prices climbed 2.9% from the prior month as gasoline prices jumped 5.7%. Food costs decreased 0.1%, while medical care costs were up 0.3%.

At the same time, apparel prices dropped steeply for a second month, falling 0.8% in April after a 1.9% March drop that was the most since 1949. Apparel only accounts for just over 3% of the CPI but a new methodology in March had dragged down the overall index.

‘Transitory’ factors

Fed Chairman Jerome Powell has suggested the too-low inflation will prove temporary as it is driven by “transitory” factors, indicating at his latest press conference that the central bank is not leaning toward either a cut or a hike in borrowing costs.

Trump has pressured the Fed for a reduction in interest rates to supercharge the economy amid muted inflation, even as the tight labor market has raised wages and lowered unemployment.

Fed officials typically focus on the less-volatile core inflation measure to gauge underlying trends. Their separate preferred index – which is linked to consumer spending tallied by the Commerce Department and tends to run slightly below the CPI – rose 1.5% in March from a year earlier, below the 2% target, as core prices eased to a one-year low of 1.6%. The April figures are due May 31.

Friday’s report showed used-car prices slumped for a third month, dropping 1.3%, the most since September, while new vehicle prices rose 0.1%, less than the prior month.

Shelter costs, which make up about a third of total CPI, continued to underpin inflation. The index climbed 0.4% for a second-straight month, with owner’s-equivalent rent rising 0.3%.

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A separate Labor Department report Friday showed how subdued inflation is affecting consumer spending power. Average hourly earnings, adjusted for price changes, climbed 1.2% in April from a year earlier, following 1.3% in March. Economists surveyed by Bloomberg had forecast the core gauge would rise 0.2% from the prior month and 2.1% from a year earlier, with corresponding gains of 0.4% and 2.1% projected for the broader index.

Jeff Kearns and Reade Pickert are reporters for Bloomberg News.