skip to Main Content

First Cut: Energy prices account for much of the April CPI decrease, but not all

The April Consumer Price Index was down 0.8% from March and up a meager 0.3% year-over-year. The CPI excluding food and energy was down 0.4% from the prior month and up 1.4% compared to a year ago. Consumer prices were held down mainly due to a 20.6% plunge in gasoline costs, although there were declines in other categories as well that could reasonably be associated with lack of demand for goods during COVID-19 quarantines. Overall energy prices were down 10.1% in April. Prices for food and beverages were up 1.4% in April compared to March and was probably associated with higher costs of getting food to stores and shortages of some items.

Shelter costs were flat for a second month in a row in April as upward price pressures were absent while consumers were stuck in place. There was little competition for rental properties to drive up rents and the drop in homebuying also cut into price increases. However, it was the 7.1% decline in prices for lodging away from home that brought overall shelter cost increases to a halt. Still, compared to a year ago, shelter costs were up 2.6% overall and a main source of what upward price pressures there were. Excluding food, energy, and shelter, the CPI was up 0.6% compared to April 2019.

In other aspects of leisure and hospitality that have been hard-hit by restrictions on movement during the pandemic, airfares were down 15.2% in April from March on top of the 12.6% fall in March from February. Year-over-year airfares plunged 24.3%.

While services have been the main reason that the CPI has remained within reach of the Fed’s 2% inflation target, overall services prices were down for a second month in a row in April, off 0.3% at a steepening month-over-month decrease than the 0.1% in March. Compared to a year ago, the CPI services index was up 2.1%, its lowest pace since 2.0% in May 2015. It is notable that the increases in medical care services are starting to pick up with a 0.5% increase for a second month in a row. Increases in health insurance costs are arising a little less rapidly at up 1.1% in April, but overall this is a source of high and fast price increases for consumers.

The index for commodities fell 1.6% month-over-month in April and was down 2.5% compared to the year-ago month. Prices for medical care commodities were actually down 0.1% in April after flat in March. To some extent prices to consumers can’t go up if the goods are in limited supply and many jurisdictions have cracked down hard on price gouging of personal protective equipment.

Back To Top