Inflation worse than headline number suggests

The annual inflation rate in April was the lowest it’s been in two years, according to Labor Department data released today – 4.9 percent. That may seem like good news but digging into the data in the Consumer Price Index, things don’t look so great, says CEI’s senior economist.

Statement by CEI Senior Economist Ryan Young:

“Inflation over the last 12 months fell below 5 percent for the first time since April 2021, according to this morning’s CPI release. Under the hood, the news isn’t as rosy. Inflation sped up in the last month, from 0.1 percent in March to 0.4 percent in April. The Fed was right to raise interest rates last week and may have to do so again.

“Today’s core CPI numbers are especially troubling. Volatile food and energy prices distort CPI readings by moving around for reasons having nothing to do with monetary inflation. Core CPI removes those numbers to get a clearer picture. April’s core CPI number is 5.5 percent over the last year, compared to 4.9 percent for the headline CPI number.

“What we’re seeing are the aftereffects of Washington’s pandemic spending overreaction. A healthy economy was hit by a pandemic, shut down for a bit, then opened back up. Inflation would never have become a problem if the Fed, Congress, and Presidents Trump and Biden had shown some restraint.

“Instead of sticking to pandemic-related aid, they grew the money supply by $5 trillion and passed every wish-list spending item they could. This caused today’s inflation, as well as today’s debt-ceiling drama. An adult approach to COVID relief would have avoided all of these problems.”