U.S. inflation eased last month in 1st slowdown of 2024

WASHINGTON — Led by lower food and auto prices, inflation in the United States cooled slightly last month after three elevated readings, likely offering a tentative sigh of relief for officials at the Federal Reserve as well as President Joe Biden’s re-election team.

Consumer prices rose 0.3% from March to April, the Labor Department said Wednesday, down slightly from 0.4% the previous month. Measured year-over-year, inflation ticked down from 3.5% to 3.4%. And a gauge of underlying inflation, which excludes volatile food and energy costs, reached its lowest level in three years.

Inflation had been unexpectedly high in the first three months of this year after having steadily dropped in the second half of 2023. The elevated readings had dimmed hopes that the worst bout of inflation in four decades was being tamed.

Whether inflation continues its decline could have a significant effect on the presidential race. Republican critics of Biden have sought to pin the blame for high prices on the president. Though hiring remains robust and wage growth, on average, healthy, consumer prices remain generally well above their pre-pandemic levels.

While the latest figures show inflation still well above the Fed's 2% target, it's the first time this year that the year-over-year figure has declined. And price increases cooled in some service industries, such as hotels, health care and auto repairs, that had previously kept inflation elevated.

“The fight against inflation is not yet over, but the worsening trend observed in the first quarter of 2024 may have ended," said Danielle Hale, chief economist at Realtor.com.

That's not the case in the metropolitan area.

Consumer prices in the 25-county region that includes Long Island were up 3.8% in April compared with a year earlier. In March, the year-over-year increase was 3.4%, according to the federal Bureau of Labor Statistics, which produces the Consumer Price Index.

The rise in prices from March to April was 0.4%, the same in the February-March period, based on the index. 

William J. Sibley, BLS' regional commissioner, said on Wednesday that the increase was due "primarily to higher prices for shelter and food."

Residential rents climbed 4.2% last month compared with April 2023. Grocery prices were up 0.4%, led by a 2% jump in the cost of dairy products in the period.

Gasoline prices increased 1.2%, year-over-year, while electricity was up 19.8%.

The increases were partially offset by drops in the cost of medical care and clothing, down 2.1% and 1.2%, respectively.

Area economists were surprised by the spike in electricity prices but said the cost of food and gasoline would have a greater impact on consumer behavior.

"Electricity is important but as far as consumers' budgets, food expenditures and gas are more significant," said John A. Rizzo, an economist and Stony Brook University professor. "I don't think these new numbers are going to impact consumer spending much on Long Island."

He and other economists, along with retailers, closely monitor consumer spending because it accounts for about 70% of economic activity on the Island and nationwide.

In Washington, Fed Chair Jerome Powell had responded to the high inflation readings earlier this year by dropping his previous suggestions that interest rate cuts were likely in 2024. Instead, he stressed that the Fed’s policymakers need “greater confidence” that inflation is falling to their 2% target before they would reduce borrowing rates from high levels.

Some economists suggest that if inflation — and the overall economy — continue to cool, the Fed could still cut rates twice this year, which would reduce costs for mortgages, auto loans and credit cards, among other forms of borrowing.

— With James T. Madore