Some inflation in the economy as U.S. consumer prices recorded their largest increase in 10 months in April. The Labor Department said on Thursday, May 15 that its Consumer Price Index (CPI) increased 0.3 percent last month. Both food prices and the cost of gasoline are drivers for the increase.
The “Core CPI” removes food and energy prices from the calculation, and this measure rose 0.2 percent (the same as in March). Over the past 12 months the Core CPI has increased 1.8 percent. The Federal Reserve worries that inflation is running too low, but consistent, gradual price increases keep the alarms low.
While increasing prices may not be what most consumers desire, economists prefer this news when overall economic growth is lagging. Conventional thought suggests an economy in which prices on average are increasing at a low rate between 2.5-3.0% annually provides the best environment for economic growth.
For the Average Joe, food prices rose again in April due to a drought in the West which pushed up prices for meat, dairy, fruit and vegetables. Poultry, eggs and fish prices are also up so it’s going to cost a little more to put a meal on the table this summer.
On the energy side, gasoline prices rose almost 2.5%, but was said to have been “offset” by a 2.6 percent drop in electricity prices (the largest decrease in almost 30 years). We scratch our heads here in Chicago as our local electric utility informed us recently to expect higher prices this summer (the perils of a deregulated power market in Illinois).
Professional buyers take note as much as consumers, as there should be enough market activity this summer to keep your sourcing pipelines full.