The pace of inflation around the U.S. cooled in April, the first drop after eight straight months of ever-faster price increases.
The Consumer Price Index, a broad basket of goods and services, rose 8.3% from a year ago, the Labor Department reported Wednesday, down from an 8.5% annual increase in March. Core inflation, which strips out food and energy prices, increased 6.2% over the last year.
The dip, although it’s less than economists had predicted, suggests that the worst of the price increases of the past year may have passed.
“Inflation has likely peaked, as base effects pushed the year-over-year metrics down in April relative to March,” Jeffrey Roach, chief economist for LPL Financial, said in an email. “The slight moderation in inflation will likely provide some needed boost in consumer confidence.”
Prices for food, shelter and new cars increased the most in April, while the price of energy dropped after rising in recent months. Used car prices fell for the third month in a row. Apparel reversed a recent run-up in prices.
Although inflation eased last month, April’s reading is the second-highest pace of price increases since the early 1980s and has squeezed consumers on all fronts, outpacing wage increases.
And sustained increases in housing and airfare costs show that consumer prices remain uncomfortably high. Airfares increased 18.6% in April, the largest monthly gain on record, according to data provider FactSet.
“The peak of inflation may be behind us, but today’s CPI report points to a long, slow descent or maybe even a plateau around 8% until prices start to drop significantly,” Robert Frick, corporate economist at the Navy Federal Credit Union, said in a note.
Americans resumed spending in mid-2021 after a year of pandemic lockdowns, rapidly driving up prices for goods including food, furniture and cars. Coronavirus-fueled disruptions in shipping have kept prices high, and Russia’s war in Ukraine this year threatens to disrupt markets for fuel, wheat and other commodities even further.
Inflation also has become an urgent political challenge for President Joe Biden, who on Tuesday declared it “the No. 1 problem facing families today” and his “top domestic priority.”
Biden said his administration will help ease price increases by shrinking the government’s budget deficit and by fostering competition in industries, like meatpacking, that are dominated by a few industry giants.
The Associated Press contributed reporting.