Consumer Price Index

More stories

  • 188 Shares159 Views

    in Economy

    Inflation moderated in April but was still close to its highest level in 40 years.

    by

    An important measure of consumer prices showed that inflation slowed in April, but remained close to a four-decade high.The Personal Consumption Expenditures price index rose 0.2 percent last month from March and was up 6.3 percent from a year earlier, the Commerce Department said Friday. That is down from a 6.6 percent annual increase in March, which represented the fastest pace of inflation since 1982.Economists and investors closely watch the index, an alternative to the better-known Consumer Price Index, because the Federal Reserve prefers it as a measure of inflation. The central bank has been raising interest rates and announced that it will begin paring asset purchases in a bid to cool the economy and tame inflation.The slowdown in inflation in April was largely the result of a drop in the price of gasoline and other energy sources. Gas prices soared in February and March largely because of Russia’s invasion of Ukraine, then moderated somewhat in April. They have risen again in recent weeks, however, which could push measures of inflation back up in May. Food prices have also been rising quickly in recent months, a pattern that continued in April.Stripping out the volatile food and fuel categories, consumer prices were up 4.9 percent in April from a year earlier. That core measure, which some economists view as a more reliable guide to the underlying rate of inflation, was up 0.3 percent from a month earlier, little changed from the rate of increase in March.The comparatively tame increase in core prices in the data released Friday stood in contrast to the sharp acceleration in the equivalent measure in the Consumer Price Index report released by the Labor Department this month. The divergence was mostly the result of differences in the way the two measures count airline fares, however, and economists said the Fed was unlikely to take much comfort from the Commerce Department data.“My suspicion is they will probably look through the slowdown,” said Omair Sharif, the founder of the research firm Inflation Insights. He noted that the core index also slowed last fall, only to pick up again at the end of the year, catching the Fed off guard.Many forecasters believe that the headline inflation rate peaked in March and that April marked the beginning of a gradual cool-down. But the recent rebound in gas prices is threatening to complicate that picture. And even if inflation continues to ebb, prices are still rising far more quickly than the Fed’s target of 2 percent over time.“For the past year, inflation has been high and rising and we’re at a point now where it’s high and falling,” said Tim Quinlan, a senior economist at Wells Fargo.The public, Mr. Quinlan added, is unlikely to see the slight moderation in inflation as much to celebrate.“To them, the year over year growth in prices doesn’t matter,” he said. “It’s why does a crappy lunch cost $12 now?” More

  • 63 Shares189 Views

    in Economy

    What’s Your Rate of Inflation?

    by

    Inflation is at the highest level in four decades. But how you experience it can vary greatly depending on what you eat, how much you travel and your other spending habits. Answer seven questions to estimate your personal inflation rate.

    The numbers above are derived from the Consumer Price Index, the best-known measure of inflation. The C.P.I. is based on a “basket of goods”: The prices of hundreds of commonly purchased goods and services, from cookies to cars to college tuition, are blended together, with each product counted in proportion to its share of overall spending.

    Clothing, for example, accounts for about 2.5 percent of the average American’s monthly spending, so clothes prices make up that share of the index. But those are averages — if you spend more than 2.5 percent of your budget on clothes, your personal rate of inflation will look different.

    Prices are rising pretty much across the board now, but the increases are particularly rapid in some categories, like meat, cars and travel. People who spend a lot on those categories are experiencing much faster inflation as a result.

    The calculator above adjusts your rate of inflation based on how much more or less you spend on different products than the average American. It doesn’t account for other factors, like whether you live in a more expensive part of the country or are more likely to shop around for bargains. Even so, it reveals a wide range of different experiences: Based on how you answered the questions above, you might have a “personal inflation rate” as low as 5 percent or as high as 15 percent.

    Even a 5 percent inflation rate is high by the standards of recent history – before the pandemic, prices in the United States were rising about 2 percent a year. But when it comes to inflation, small differences have a big impact. At 5 percent, prices double in about 15 years. At 7 percent, prices double in just over 10 years. And at 15 percent, prices double in only five years.

    Oil price boom

    Perhaps the clearest case study in how people experience inflation differently is gasoline.

    Gas prices have shot up in recent months, partly because Russia’s invasion of Ukraine roiled global energy markets. Prices were up 48 percent in March from a year earlier, accounting for a fifth of the increase in the overall Consumer Price Index. More

  • 113 Shares189 Views

    in Economy

    How Rising Mortgage Rates Are Affecting the Housing Market

    by

    Mortgage costs have jumped as the Federal Reserve has raised rates. With higher rates come fewer offers.Luis Solis, a real estate agent in Portland, Ore., marked a milestone weekend late last month. It was the first time in two years that one of his listings made it to Monday without any offers.This particular house was listed at $500,000, and after a Saturday open house there were promises of at least three bids, including one for $40,000 over the asking price. Then Monday came, and there were none. Then Tuesday, and Wednesday. An offer finally came in, but instead of being 10 to 15 percent higher than the listing — something that became almost standard at the height of the coronavirus pandemic’s housing market — it was right at $500,000. And it was the only one. And the buyer took it.“We didn’t have the competing offers that would drive up the price,” Mr. Solis said. “It’s not crazy like it was.”Taking some air out of the crazed market — and the hot economy in general — is precisely what the Federal Reserve wanted to do when it raised its key interest rate in March and signaled more increases to come. Mortgage rates have surged in response, jumping to 5 percent from slightly more than 3 percent since the start of the year.That rise means the monthly payment on a $500,000 house like the one Mr. Solis just sold would be about $500 more a month than it was at the end of last year, assuming a fixed-rate mortgage and 20 percent down payment. And the higher cost comes on top of a more than 30 percent rise in home prices over the past two years, according to Zillow.Now early data and interviews across the industry suggest that many buyers have finally been exhausted by declining affordability and cutthroat competition, causing the gravity-defying pandemic housing market to start easing up.Open houses have thinned. Online searches for homes have dropped. Homebuilders, many of whom have accrued backlogs of eager buyers, say rising mortgage rates have forced them to go deeper into those waiting lists to sell each house. In a recent survey of builders, Zelman & Associates, a housing research firm, found that while builders were still seeing strong demand, cancellations had inched up, though still well below historically low levels. Builders have also grown increasingly concerned about rising mortgage rates and surging home prices.“There is a lot more concern than there had been,” said Ivy Zelman, chief executive of Zelman & Associates.By any standard that prevailed before 2020, this would be a hot real estate market. Home prices remain high, and not only is there little sign they will fall anytime soon, but many economists predict a continued rise through the year. Still, after two years of torrid demand, agents had become accustomed to fielding multiple offers for each listing and setting price records each weekend. That frenzy, brought on by pandemic migrations and the growing centrality of the home as a space where people both live and work, is now subsiding.“We’re seeing some early indications that a growing share of home buyers, especially in expensive coastal markets, are getting priced out,” said Daryl Fairweather, chief economist at Redfin.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.Interest Rates: As it seeks to curb inflation, the Federal Reserve announced that it was raising interest rates for the first time since 2018.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.For buyers, however, the market will still feel plenty competitive. Even if prices aren’t rising at the pace of the past two years, homes are selling within a week of being listed and posting no significant price declines.Construction in Missoula, Mont. Among homebuilders, “there is a lot more concern than there had been,” said Ivy Zelman of Zelman & Associates.Tailyr Irvine for The New York TimesThat rising mortgage rates have not had more of an effect shows how difficult it is to tamp down prices and bring demand into balance in an economy where a lack of supply — marked by half-empty car lots, furniture order backlogs and a paucity of homes for sale — is playing a guiding role.In the prepandemic world of bustling offices and smoothly functioning supply chains, such a steep rise in mortgage rates, on top of years of double-digit price appreciation, would have economists predicting a severe drop in demand and maybe even falling prices. Those trends would have echoed through the broader economy, with fewer people spending on moving vans and new couches, and as existing homeowners felt on less solid financial footing and potentially curbed their own spending. Instead, economists are predicting that prices will continue to rise — by double digits in some forecasts — through the year.“I don’t think it’s going to stop the housing market,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association.The problem is there are so few homes for sale that even a slower market is unlikely to create enough inventory to satisfy demand anytime soon. For years the United States has suffered from a chronically undersupplied housing market. Home building plunged after the Great Recession and remained at a recessionary pace long after the economy and job market had recovered. Even today, the pace of home building remains below the heights of the mid-2000s, before the 2008 financial crisis and housing market crash.This makes it a good time to be a seller — assuming you don’t need to buy. Christopher J. Waller, a governor at the Fed, is living this out.“I sold my house yesterday in St. Louis to an all-cash buyer, no inspection,” Mr. Waller said in panel discussion on Monday. “But I’m trying to buy a house in D.C., and now I’m on the other side, going: ‘This is insane.’”He noted that the sharp rise in mortgage rates over recent months should have an effect on what happens with housing.The recent lack of new building was not for lack of interest. Members of the millennial generation, now in their late 20s to early 40s, are in their prime home buying years. Their desire to buy houses and start families has collided with scant supply, leading to an increase in prices.Shutdowns in the early months of the pandemic slowed home building, but housing starts have been on an upswing lately. New home completions remain low, however, because the tight labor market and supply chain disruptions have homebuilders scrambling to find wood, dishwashers, garage doors — and workers.Inflation F.A.Q.Card 1 of 6What is inflation? More

  • 125 Shares99 Views

    in Economy

    Inflation Hits Fastest Pace Since 1981, at 8.5% Through March

    by

    Gasoline weighed heavily in the increases, while prices moderated in several categories. Some economists say the overall rate may have peaked.Inflation hit 8.5 percent in the United States last month, the fastest 12-month pace since 1981, as a surge in gasoline prices tied to Russia’s invasion of Ukraine added to sharp increases coming from the collision of strong demand and stubborn pandemic-related supply shortages.Fuel prices jumped to record levels across much of the nation and grocery costs soared, the Labor Department said Tuesday in its monthly report on the Consumer Price Index. The price pressures have been painful for American households, especially those that have lower incomes and devote a big share of their budgets to necessities.But the news was not uniformly bad: A measure that strips out volatile food and fuel prices decelerated slightly from February as used car prices swooned. Economists and policymakers took that as a sign that inflation in goods might be starting to cool off after climbing at a breakneck pace for much of the past year.In fact, several economists said March may be a high-water mark for overall inflation. Price increases could begin abating in the coming months in part because gasoline prices have declined somewhat — the national average for a gallon was $4.10 on Tuesday, according to AAA, down from a $4.33 peak in March. Some researchers also expect consumers to stop buying so many goods, whether furniture or outdoor equipment, which could begin to take pressure off overtaxed supply chains.“These numbers are likely to represent something of a peak,” said Gregory Daco, the chief economist at Ernst & Young’s strategy consultancy, EY-Parthenon. Still, he said, it will be crucial to watch whether price increases excluding food and fuel — so-called core prices — slow down in the months ahead.A letup would be welcome news for the White House, because inflation has become a major liability for Democrats as midterm elections approach in November. Public confidence in the economy has fallen sharply, and as rapid price increases undermine support for President Biden and his party, they could imperil their control of Congress.Inflation Rates Around the World More

  • 138 Shares179 Views

    in Economy

    Few Cars, Lots of Customers: Why Autos Are an Inflation Risk

    by

    Economists are betting that supply chains for all kinds of goods will heal, shortages will ease and price gains will slow. Cars are a wild card in those forecasts.Corina Diehl is eager for more sedans and pickup trucks to sell her customers in and around the Pittsburgh area, but as the pandemic enters its third year, cars remain in short supply and the squeeze on inventory shows no sign of abating.“If I could get 100 Toyotas today, I would sell 100 Toyotas today,” Ms. Diehl said. Instead, she said, she’s lucky to have three. “It’s the same with every brand I have.”Dealerships like Ms. Diehl’s are wrestling with inventory shortages — the result of a dearth of computer chips, production disruptions and other supply chain snarls. That’s not a problem just for car buyers, who are paying more; it’s also a problem for economic policymakers as they try to wrestle the fastest inflation in four decades under control.Car prices have helped push inflation sharply higher over the past year, and economists have been counting on them to level off and even decline in 2022, allowing the rising Consumer Price Index to moderate markedly.Rapid Car Inflation Year-over-year change in select automotive categories of the Consumer Price Index

    Source: Bureau of Labor Statistics, accessed via FREDBy The New York TimesBut it is increasingly unclear how much and how quickly car prices will slow their ascent, because of repeated setbacks that threaten to keep the market under pressure. While price increases are showing some early signs of slowing and used car costs, in particular, are unlikely to climb at the same breakneck pace as last year, continued shortfalls of new vehicles could keep prices elevated — even rising — longer than many economists expected.“We’ve stumbled into another pattern of a series of unfortunate events,” said Jonathan Smoke, the chief economist at Cox Automotive, an industry consulting firm. Shutdowns meant to contain the coronavirus in China, computer chip factory disruptions tied to a recent earthquake in Japan, the aftereffects of the trucker strike in Canada and the war in Ukraine are adding up to slow production.Mr. Smoke expects new car prices to keep rising this year — perhaps even at nearly the same pace as last year — and used cars to begin to depreciate again, but said the shortage of new cars could spill over to blunt that weakening. And used cars may not fall in price at all if rental companies begin to snap them up as they did in 2021.“If the supply situation gets worse, it’s still possible that we repeat some of what we had last year,” he said.Mr. Smoke’s predictions — and worries — are more grim than what many economists are penciling into their forecasts.Alan Detmeister, a senior economist at UBS and former chief of the Federal Reserve Board’s wages and prices section, said he expected a 15 percent decline in used car prices by the end of the year, with new car prices falling 2.5 to 3 percent.Those estimates are predicated on an increase in supply.“This is a huge wild card in the forecast,” Mr. Detmeister said. But even if production doesn’t pick up, “it is extremely unlikely that we’ll see the kind of increases we saw last year,” he added, referring to prices.Omair Sharif, founder of Inflation Insights, a research firm, said he was still expecting improved supply and slower demand to help the used car market come into balance. While used car prices may rise for a few months as households spend tax refunds on automobiles, he expects the increase to be modest in part because they already nearly match new car prices.“I would be shocked if the used car market really accelerated,” he said. New car prices are a more complicated story, he added: “There, we have legitimately serious inventory problems.”Automakers are struggling to ramp up production. Russia’s invasion of Ukraine has created shortages in electrical components needed for cars, prompting S&P Global Mobility to cut its 2022 and 2023 forecasts for U.S. production. More critically, the chips needed to power everything from dashboards to diagnostics remain in short supply. Ford Motor and General Motors temporarily shut down some U.S. factories last week because of supply issues, and the industry broadly cannot ship as many cars as customers want to buy.In cars, “production remains below prepandemic levels, and an expected sharp decline in prices has been repeatedly postponed,” Jerome H. Powell, the Fed chair, said during a speech last month. He noted that while supply chain relief in general seemed likely to come over time, the timing and scope were uncertain.Cars loaded in Kansas City, Kan., for transport to a dealership in Wichita, Kan. Automakers are struggling to ramp up production as repeated shocks rock the industry.Chase Castor for The New York TimesAnalysts had been hoping that chip shortages, in particular, would ease up, but “we’ve got at least another year, if not more,” for the supply chain to heal, said Chris Richard, a principal in the supply chain and network operations practice at the consulting firm Deloitte.While smaller electronics producers may be able to find enough semiconductors, he said, cars contain hundreds or even thousands of chips — often different kinds — and many auto companies do not have direct and close relationships with their providers.The earthquake in Japan temporarily shut down chip plants that supply the auto industry, costing a few weeks of production at one. Making chips requires neon, and much of it comes from Ukraine. Lockdowns in Shanghai may reduce chip production at some Chinese factories.At the same time, demand is booming. Ford reported record retail vehicle orders in March, including for its F-series trucks, which remained in demand even as gas prices jumped.Car buying could begin to slow as the Fed raises interest rates, making car loans more expensive, but so far there is little sign that is happening. In fact, demand has been so strong that automakers have been cracking down on dealers that charge above list price, threatening to withhold fresh inventory.“I don’t see the prices subsiding. You don’t need them to subside,” said Joseph McCabe at AutoForecast Solutions, an industry analyst, explaining that dealer costs are increasing and companies want to protect their profits. “Prices will go up, and there will be less negotiating space for consumers, because there’s high demand and no availability.”Mr. McCabe does not think that car inventory will ever fully rebound: Dealers and automakers have learned that they make more money by effectively making cars to order and running with learner inventory. If that’s the case, the permanently restrained supply could have implications for the rental and used car markets.If car prices keep climbing briskly, it will be hard for inflation overall to moderate as much as economists expect — to around 4 to 4.5 percent as measured by the Consumer Price Index by the end of the year, according to a Bloomberg survey, down from 7.9 percent in February.That’s because prices for services, which make up 60 percent of the index, are also climbing robustly. They increased 4.8 percent in the 12 months through February, and could remain high or even continue to rise as labor shortages bite.Of the goods that make up the other 40 percent of the index, food and energy account for about half. Both have recently become markedly more expensive and, unless trends change, seem likely to contribute to high inflation this year. That puts the onus for cooling inflation on the products that make up the remainder of the index, like cars, clothing, appliances and furniture.While the Fed’s policy changes could tamp down demand and eventually slow prices, policymakers and economists had been hoping they would get some natural help as supply chains for cars and other goods worked themselves out.“We still expect some deflation in goods,” Laura Rosner-Warburton, an economist at MacroPolicy Perspectives, said of her forecast. She said that she expected fuel prices to moderate, and that her call included some “modest declines” in vehicle prices.It’s not just economists who are hoping that forecasts for a rebounding supply and more moderate car prices come true. Buyers and dealers are desperate for more vehicles. Ms. Diehl in Pittsburgh sells makes including Toyota, Volkswagen, Hyundai and Chevrolet, and companies have told her that inventory may begin to recover toward the end of the year — a reprieve that seems far away.Her customers are hungry for trucks, electric vehicles and whatever else she can get her hands on. When one of her dealerships lists a new car on its website in the evening, a buyer will show up first thing in the morning, she said. Her dealerships have a backlog of 400 to 500 parts to fix cars, up from 10 to 20 before the pandemic.“It’s absolute insanity at its finest,” Ms. Diehl said. “I don’t see an abundance of inventory before 2023 and 2024.” More

  • 125 Shares129 Views

    in Economy

    The Personal Consumption Expenditure Index Climed 6.4 Percent in February

    by

    Inflation continued to run at the fastest pace in 40 years in February, fresh data released on Thursday showed, at a moment when war in Ukraine and continued supply chain disruptions tied to the coronavirus promise to keep prices rising.Prices, as measured by the Personal Consumption Expenditures Index, rose by 6.4 percent in the year through February, the fastest inflation rate since 1982. They climbed 5.4 percent after stripping out food and fuel costs, which can be volatile, the data showed.That pace of increase is far faster than the 2 percent annual inflation that the Federal Reserve targets. While central bankers expect today’s rapid inflation to cool by the end of the year, falling to 4.3 percent by the final three months of 2022, that pace of increase would still be too quick for comfort.Central bankers began raising interest rates earlier this month, lifting them by a quarter percentage point, and have signaled more to come as they begin to wage an assault on rising prices. By making borrowing more expensive, the Fed can weigh on demand, allowing supply to catch up and eventually temper price increases.“There is an obvious need to move expeditiously to return the stance of monetary policy to a more neutral level, and then to move to more restrictive levels if that is what is required to restore price stability,” Jerome H. Powell, the Fed chair, said during a recent speech.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.Interest Rates: As it seeks to curb inflation, the Federal Reserve announced that it was raising interest rates for the first time since 2018.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.The Personal Consumption Expenditures figures follow a more timely inflation release — the Consumer Price Index — and tend to be easy to forecast, so they do not come as a surprise to Wall Street. But because the gauge is the Fed’s preferred inflation measure, the fresh figures reinforce the challenge that economic officials face.While policymakers are watching for any sign that inflation is slowing down or is about to cool off, so far there is little to suggest a meaningful pullback. Supply chains remained stressed, and recent shutdowns in China could pose further strain. Apartment rents are climbing, elevating housing costs. Workers are in short supply and wages are rising, which could bolster inflation in other service categories.Russia’s invasion of Ukraine pushed up oil and gas prices, along with other commodity costs, which is likely to further elevate inflation when March data are released. While a few days of gas price increases happened in February, the bulk of them came this month.Companies are trying to navigate the complicated moment, gauging whether input cost increases will continue for a second year — and whether and how to pass that on to consumers.Chewy, the pet goods retailer, recently signed a new freight contract that will cost it more this year; and in the final quarter of 2021, it also faced higher labor costs. But it is hoping that those trends do not last, or that it can offset the climbing expenses through efficiencies.“As we close the book on 2021 and move forward in 2022, we are already seeing improvements in labor availability, inbound shipping costs and pricing, while out-of-stock levels and outbound shipping costs remain elevated,” Sumit Singh, the firm’s chief executive officer, said on an earnings call this week. “Ultimately, we believe most of these challenges are not permanent in nature.”Inflation F.A.Q.Card 1 of 6What is inflation? More

  • 113 Shares169 Views

    in Economy

    Americans, especially Republicans, are getting more worried about inflation.

    by

    Americans are more worried about inflation than at any point since 1985, and that concern is quickly escalating, according to a new poll, a potential problem for Democrats and the White House ahead of the midterm elections in November.A Gallup poll released Tuesday showed that rising prices were the No. 1 economic concern for Americans, with 17 percent calling inflation the “nation’s most important problem.”Inflation stress divided slightly among income groups — 63 percent of adults earning $40,000 or less were very concerned, compared with 58 percent of those earning $100,000 or more — and starkly along political lines. About 79 percent of Republicans were seriously worried about inflation, versus 35 percent of Democrats.“That reflects the ongoing phenomenon we’re seeing in polarization,” said Lydia Saad, director of U.S. social research at Gallup. She noted that people increasingly answered economic questions differently when their party controlled the White House, and often in a way that reflected the administration’s messaging. “Democrats are just going to downplay problems, just like Republicans did when Trump was in office,” she said.President Biden’s administration initially expected rapid inflation to fade. As it has lingered, the White House has switched to arguing that it is part of a global phenomenon and has been exacerbated by Russia’s invasion of Ukraine. That is accurate but probably not the full story, since inflation in the United States is higher than in many other developed economies.Prices in the United States rose 7.9 percent in the 12 months through February, according to the latest reading of the Consumer Price Index released this month. That was the highest level of inflation since early 1982.Ms. Saad said it might be a “silver lining” that the worry index was lower now than at the start of the 1980s, when about half of American adults ranked rising prices as the nation’s top problem. Inflation had been elevated for years back then, peaking at about 14.6 percent in 1980.Even so, rising prices have been undermining confidence in the overall economy, according to the Gallup numbers and other consumer sentiment readings. Survey data from the University of Michigan shows that Republicans have been more pessimistic about the economy than at any point since 1980. Democrats, while more optimistic, were less confident in March than they had been at any point since Mr. Biden’s 2020 election victory. More