Wholesale prices in the United States increased very slightly last month, according to the latest data from the Labor Department. This comes more than a year after the Federal Reserve aggressively raised interest rates. The government PPI rebounded in April, rising 0.2% from February’s low. The costs of groceries, taxi rides, and storage space all went down.
Annual wholesale price inflation dropped to 2.3% in December, the lowest since the beginning of 2021, as falling energy prices dampened overall price pressures. Excluding the effects of seasonality and price fluctuations in food and energy, core wholesale inflation increased by 0.2% in March and 3.2% annually. Core wholesale inflation fell for the ninth straight month, reaching its lowest level since March 2021.
The Labor Department’s Thursday numbers on manufacturer, farmer, and wholesaler prices can indicate consumer inflation’s speed. Government reports released the previous day, on the other hand, had shown that at the consumer level, core prices climbed 0.4% from March to April, marking five consecutive months wherein the prices kept increasing by that much, which is beyond the pace necessary to meet the Fed’s annual inflation target of 2%.
Consumer inflation is 4.9%, down from 9.1% in June 2022 and is above the Fed’s aim. US economic growth is slowing. January–March economic growth was 1.1%. The Fed raised its target rate ten times in 14 months. The central bank’s policymakers aim to slow the US economy only enough to control price rises but not to cause a recession. However, many economists find this skepticism and expect the country to slip into a recession later this year.
The housing market and other key industries have been hit hard by the current borrowing rate. March pre-owned home sales were down 22% from February due to higher borrowing rates. Last year, residential investment fell dramatically. Even if it has slowed, the job market is the engine that drives the economy.
Unemployment is 3.4%, a 54-year low. The Fed has paused interest rate hikes to assess how higher rates affect growth and inflation. Chair Jerome Powell also noted the need to monitor other dangers, such as the current banking sector upheaval, to determine whether to pause rate hikes. Powell expects other banks to reduce lending after three significant banks failed in six weeks. Lending cuts should lower inflation and reduce the Fed’s need to hike rates.
