US wholesale price data for April suggests inflationary pressures are easing | Business and Business News

While wholesale prices rose at modest levels, weekly jobless claims hit a more-than-expected 1.5-year high.

Wholesale prices in the United States edged up last month, the latest sign that inflationary pressures may be easing, more than a year after the Federal Reserve launched an aggressive campaign of steadily higher interest rates.

In March-April, the government’s producer price index rose just 0.2 percent after falling 0.4 percent in February-March, held back by falling food, transport and storage prices.

Year-on-year, wholesale prices rose just 2.3 percent, the 10th straight slowdown and the lowest since January 2021. Lower energy prices helped slow the annual inflation rate.

Excluding volatile food and energy prices, so-called core wholesale inflation rose 0.2 percent from March and 3.2 percent from 12 months earlier. The year-on-year rise in core wholesale inflation was the lowest since March 2021 and marked the seventh straight slowdown. The Fed pays particular attention to core prices, which tend to be a better measure of the economy’s underlying inflationary pressures.

The Producer Price Index released by the US Department of Labor on Thursday reflected the prices charged by manufacturers, farmers and wholesalers. This could be a first indication of how quickly consumer inflation will rise. The index is used to calculate the Fed’s preferred measure of inflation: the Commerce Department’s Personal Consumption Expenditure Index.

April’s mild producer price numbers were “much needed and expected good news” for the Fed’s fight against inflation, said Ryan Sweet, chief US economist at Oxford Economics.

Thursday’s wholesale numbers follow a government report on Wednesday that showed core consumer-level prices rose 0.4 percent from March to April — the fifth straight month these prices have risen at least as much, well above the pace , which was required to meet the Fed’s 2 percent annual inflation target.

Year-on-year, overall consumer inflation is 4.9 percent, down significantly from its peak of 9.1 percent in June 2022, but still well above the Fed’s target. Economic growth slowed to a tepid annual rate of 1.1 percent from January to March.

cracks in the economy

The Fed has raised interest rates 10 times in 14 months. Central bank policymakers want to slow the US economy – the world’s largest – just enough to control inflation without triggering a recession. However, many economists were skeptical, expecting the United States to slip into recession later this year.

Higher borrowing costs have hurt some key sectors of the economy, notably the real estate market. Higher mortgage rates caused existing home sales to fall sharply in March, down 22 percent year-on-year. Investments in residential construction fell sharply in the past year.

The number of Americans filing new jobless claims rose to a 1.5-year high last week and was a seasonally adjusted 264,000 in the week ended May 6, the highest since October 2021. Polled by Reuters news agency Economists had forecast 245,000 applications last week.

Still, the job market, the cornerstone of the economy, remains healthy: the unemployment rate is 3.4 percent, its lowest level in 54 years.

Last week, the Fed signaled that it may now pause its rate hikes so policymakers can step back and assess the impact of higher interest rates on growth and inflation. Chair Jerome Powell also said the Fed will be monitoring other threats, including the recent turmoil in the banking sector, to decide whether to suspend rate hikes.

Powell emphasized his belief that the collapse of three major banks over the past six weeks is likely to prompt other banks to tighten lending to avoid a similar fate. He added that such credit cuts are likely to help slow the economy, cool inflation and reduce the need for the Fed to raise rates again.