April CPI Report Shows Inflation Broadening As Energy Spike Impact Spreads

The Bureau of Labor Statistics reported that the Consumer Price Index increased 3.8% in April from year-ago levels after increasing 3.3% in March. Year-over-year core CPI (which excludes volatile food and energy costs) rose 2.8%, outpacing the March rate of 2.6%.

Overall inflation rose 0.6% month over month after rising 0.9% in March. Core inflation rose 0.4%, matching the March increase.

Economists had expected CPI to rise 0.6% on a monthly basis and increase 3.7% year over year in April, according to the consensus estimates from FactSet. Core CPI was expected to come in up 0.3% on a monthly basis and up 2.7% year over year.

“The upswing in inflation broadened in April compared with March, which was mostly driven by energy,” says Preston Caldwell, senior US economist at Morningstar. “This month, grocery prices jumped 0.7% month-over-month. That’s not surprising, as energy is a major input into food production and transportation. Hence, rising oil prices are starting to flow through into inflation beyond the direct impact of consumer purchases of gasoline, but also via nonenergy goods for which oil is an input.”

April CPI Inflation Report Highlights

• CPI rose 0.6% for the month after rising 0.9% in March.
• Core CPI rose 0.4% after rising 0.2% in March.
• CPI increased 3.8% year over year after increasing 3.3% the prior month.
• Core CPI rose 2.8% from year-ago levels after it rose 2.6% in March.

Food prices increased 0.5% in April after holding steady 0.0% in March. Grocery prices rose 0.7%, while restaurant prices increased 0.2%. Overall energy prices increased 3.8% after rising 10.9% last month, while utility gas prices fell 0.1%, fuel oil prices increased 5.8%, gasoline prices rose 5.4%, and electricity prices increased 2.1%.

The upswing in inflation broadened in April compared with March, which was mostly driven by energy. This month, grocery (food at home) prices jumped 0.7% month-over-month. That’s not surprising, as energy is a major input into food production and transportation. Hence, rising oil prices are starting to flow through into inflation beyond the direct impact of consumer purchases of gasoline, but also via nonenergy goods for which oil is an input. Another example is airline fares, which jumped 2.8% in April.

Shelter prices rose 0.6% in April after rising 0.3% in March. However, economists had been expecting a sharp move higher in the owners’ equivalent rent reading as a statistical catch up from the impact of last fall’s federal government shutdown.

“Outside of housing, though, there were othersigns of inflation broadening which look more concerning,” Caldwell says. “This includes some non-housing core services, up 0.4% month-over-month. Core nondurables prices increased 0.3%, with large increases in apparel, toys, and other items; this probably reflected both the impact of energy as well as lingering tariff effects,” Caldwell says.

What Is the CPI?

The Consumer Price Index is a mainstream measure of inflation that tracks changes in consumer prices for a wide variety of goods and services including food, housing, healthcare, and energy.

The CPI report is widely followed by investors, but it isn’t the only way to keep track of inflation. When it comes to the Federal Reserve’s decisions on interest rates, the focus is generally on the Personal Consumption Expenditures Price Index. The Fed targets a 2% inflation rate, but that is based on the PCE inflation index, not the CPI. However, the CPI generally makes front-page news because it is released earlier than the PCE and contains much of the same information. Both reports are released on a monthly cadence.