Inflation Outpaces Wage Growth for First Time Since 2023
Inflation reached a nearly three-year high in April due to increases in energy costs stemming from the war in Iran.
Energy costs drove more than 40% of the monthly increase as national gasoline prices rose to their highest totals in nearly four years.
Americans’ budgets are constraining due to the rising cost of energy, marking the first time inflation has outpaced wage growth since May of 2023, and the tenuous ceasefire means prices are expected to stay high for months.
What’s causing shelter inflation?
Shelter inflation is likely elevated in April due to a statistical quirk from the October government shutdown.
After missing normal collection, the Bureau of Labor Statistics used a six-month panel carry-forward imputation method to calculate shelter inflation, resulting in lower readings through March. Shelter inflation should normalize in the coming months.
How did the non-seasonally adjusted basis Consumer Price Index (CPI) change in April?
The CPI rose by 3.8% in April, the largest annual increase since May 2023, following a 3.3% increase in March.
Other CPI changes include:
- The "core" CPI, excluding the volatile food and energy components, increased by 2.8% over the last 12 months
- The housing shelter index, which makes up a large portion of "core" CPI, rose 3.3% over the year
- The component index of food rose by 3.2% and the energy component index increased by 17.9%, the largest annual increase since September 2022
- On a monthly basis, the CPI rose by .6% in April and the "core" CPI increased by .4%
The price index increased for:
- Fuel oil (5.8%)
- Gasoline (5.4%)
- and electricity (2.1%)
Fan-Yu Kuo, NAHB Principal Economist, provides more details in this Eye on Housing post.